Lennar Annual Report 2016

Plain-text annual report

Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-KANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended November 30, 2016Commission file number 1-11749 Lennar Corporation(Exact name of registrant as specified in its charter)Delaware 95-4337490(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.)700 Northwest 107th Avenue, Miami, Florida 33172(Address of principal executive offices) (Zip Code)Registrant’s telephone number, including area code (305) 559-4000 Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of each exchange on which registeredClass A Common Stock, par value 10¢ New York Stock ExchangeClass B Common Stock, par value 10¢ New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act:NONE Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ý NO ¨Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ¨ NO ýIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. YES ý NO ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant wasrequired to submit and post such files). YES ý NO ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, tothe best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment tothis Form 10-K. ýIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.See definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.Large accelerated filer ýAccelerated filer ¨Non-accelerated filer ¨Smaller reporting company ¨ (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ¨ NO ýThe aggregate market value of the registrant’s Class A and Class B common stock held by non-affiliates of the registrant (183,331,818 shares of Class Acommon stock and 9,727,568 shares of Class B common stock) as of May 31, 2016, based on the closing sale price per share as reported by the New YorkStock Exchange on such date, was $8,710,459,935.As of December 31, 2016, the registrant had outstanding 203,190,098 shares of Class A common stock and 31,303,195 shares of Class B commonstock. DOCUMENTS INCORPORATED BY REFERENCE:Related SectionDocumentsIIIDefinitive Proxy Statement to be filed pursuant to Regulation 14A on or before March 30, 2017.Table of ContentsLENNAR CORPORATION FORM 10-K For the fiscal year ended November 30, 2016 Part I Item 1. Business 1Item 1A. Risk Factors 8Item 1B. Unresolved Staff Comments 17Item 2. Properties 18Item 3. Legal Proceedings 18Item 4. Mine Safety Disclosures 18 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities 19Item 6. Selected Financial Data 21Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 22Item 7A. Quantitative and Qualitative Disclosures About Market Risk 63Item 8. Financial Statements and Supplementary Data 65Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 124Item 9A. Controls and Procedures 124Item 9B. Other Information 127 Part III Item 10. Directors, Executive Officers and Corporate Governance 127Item 11. Executive Compensation 127Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 127Item 13. Certain Relationships and Related Transactions, and Director Independence 127Item 14. Principal Accounting Fees and Services 127 Part IV Item 15. Exhibits, Financial Statement Schedules 128 Signatures 131 Financial Statement Schedule 133Table of ContentsPART IItem 1.BusinessOverview of Lennar CorporationWe are one of the nation’s largest homebuilders, a provider of real estate related financial services, a commercial real estate, investment managementand finance company through our Rialto segment and a developer of multifamily rental properties in select U.S. markets primarily through unconsolidatedentities.Our homebuilding operations are the most substantial part of our business, comprising $9.7 billion in revenues, or approximately 89% ofconsolidated revenues, in fiscal 2016. As of November 30, 2016, we had grouped our homebuilding activities into three reportable segments, which we referto as Homebuilding East, Homebuilding Central, and Homebuilding West, based primarily upon similar economic characteristics, geography and producttype. Information about homebuilding activities in states in which our homebuilding activities are not economically similar to those in other states in thesame geographic area is grouped under "Homebuilding Other."As of November 30, 2016, our reportable homebuilding segments and Homebuilding Other have divisions located in:East: Florida, Georgia, Maryland, New Jersey, North Carolina, South Carolina and VirginiaCentral: Arizona, Colorado and TexasWest: California and NevadaOther: Illinois, Minnesota, Tennessee, Oregon and WashingtonOur other reportable segments are Lennar Financial Services, Rialto and Lennar Multifamily. For financial information about our Homebuilding,Lennar Financial Services, Rialto and Lennar Multifamily operations, you should review Management’s Discussion and Analysis of Financial Condition andResults of Operations, which is Item 7 of this Report, and our consolidated financial statements and the notes to our consolidated financial statements, whichare included in Item 8 of this Report.A Brief History of Our CompanyWe are a national homebuilder that operates in various states with deliveries of 26,563 new homes in 2016. Our company was founded as a localMiami homebuilder in 1954. We completed our initial public offering in 1971 and listed our common stock on the New York Stock Exchange in 1972.During the 1980s and 1990s, we entered and expanded operations in a number of homebuilding markets, including California, Florida and Texas, throughboth organic growth and acquisitions, such as Pacific Greystone Corporation in 1997. In 1997, we completed the spin-off of our then commercial real estatebusiness, LNR Property Corporation. In 2000, we acquired U.S. Home Corporation, which expanded our operations into New Jersey, Maryland, Virginia,Minnesota and Colorado and strengthened our position in other states. From 2002 through 2005, we acquired several regional homebuilders, which broughtus into new markets and strengthened our position in several existing markets. From 2010 through 2013, we expanded our homebuilding operations into theAtlanta, Oregon, Seattle and Nashville markets. Through the most recent economic downturn, we strengthened and expanded our competitive positionthrough strategic purchases of land at favorable prices. We are currently focused on maintaining moderate growth in community count and homes sales,reducing selling, general and administrative expenses by using innovative strategies to reduce customer acquisition costs, as well as on our soft-pivot landstrategy, shortening the average time between when we acquire land and when we expect to begin building homes on it.In addition to focusing on growing our core operating platforms, Lennar Homebuilding and Lennar Financial Services, we have also been focusingon maximizing the value of our investment in other businesses, including Rialto, Lennar Multifamily and FivePoint (included as one of our LennarHomebuilding unconsolidated entities), which is developing three very large multi-use planned developments in California.On September 22, 2016, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with WCI Communities, Inc. ("WCI"). WCI is aluxury homebuilder of single and multi-family homes, including a small percentage of luxury high-rise tower units, with operations in Florida. WCI's homes,tower units and communities are primarily targeted to move-up, second-home and active adult buyers. Under the Merger Agreement, we will acquire WCIthrough a merger for a combination of our Class A common stock and cash totaling $23.50 per share of WCI common stock. It is currently anticipated that themerger consideration payable to WCI stockholders will be $11.75 in cash and $11.75 in Class A common stock, with the Class A common stock valued at theaverage of its volume weighted average price on the New York Stock Exchange ("NYSE") on each of the ten NYSE trading days before closing. However, wehave the right to reduce the portion of the merger consideration that will be Class A common stock and increase the portion that will be cash, including theright to make the entire merger consideration cash.1Table of ContentsThe transaction is subject to approval by WCI's stockholders and it is anticipated that a meeting of WCI's stockholders to vote will be held inFebruary 2017. If the transaction is approved by the WCI stockholders, it will close promptly after the stockholder vote.Homebuilding OperationsOverviewOur homebuilding operations include the construction and sale of single-family attached and detached homes as well as the purchase, developmentand sale of residential land directly and through unconsolidated entities in which we have investments. New home deliveries, including deliveries fromunconsolidated entities, were 26,563 in fiscal 2016, compared to 24,292 in fiscal 2015 and 21,003 in fiscal 2014. We primarily sell single-family attachedand detached homes in communities targeted to first-time homebuyers, move-up homebuyers and active adult homebuyers. The average sales price of aLennar home varies depending on product and geographic location. For fiscal 2016, the average sales price was $361,000, compared to $344,000 in fiscal2015 and $326,000 in fiscal 2014.We operate primarily under the Lennar brand name. Our homebuilding mission is focused on the profitable development of residential communities.Key elements of our strategy include:•Strong Operating Margins - We believe our operating leverage combined with our attractive land purchases position us for strong operatingmargins.•Everything’s Included® Approach - We are focused on distinguishing our products, including through our Everything’s Included® approach,which maximizes our purchasing power and enables us to include luxury features as standard items in our homes.•Innovative Homebuilding - We are constantly innovating the homes we build to create products that better meet our customers' needs anddesires. Our Next Gen® home, or a home within a home, provides a unique new home solution for multi-generational households as homebuyersoften need to accommodate children and parents to share the cost of their mortgage and other living expenses. In fiscal 2016, we delivered1,186 Next Gen® homes representing an increase of 18% from the prior year and 4% of total home deliveries, excluding unconsolidated entities.The average sales price of the Next Gen® homes delivered in fiscal 2016 was $461,000, which is 28% above the average sales price of totalhome deliveries, excluding unconsolidated entities.•Flexible Operating Structure - Our local operating structure gives us the flexibility to make operating decisions based on local homebuildingconditions and customer preferences, while our centralized management structure provides oversight for our homebuilding operations.Diversified Program of Property AcquisitionWe generally acquire land for development and for the construction of homes that we sell to homebuyers. Land purchases are subject to specifiedunderwriting criteria and are made through our diversified program of property acquisition, which may consist of:•Acquiring land directly from individual land owners/developers or homebuilders;•Acquiring local or regional homebuilders that own, or have options to purchase, land in strategic markets;•Acquiring land through option contracts, which generally enables us to control portions of properties owned by third parties (including landfunds) and unconsolidated entities in which we have investments until we have determined whether to exercise the options;•Acquiring parcels of land through joint ventures or partnerships, which among other benefits, limits the amount of our capital invested in landwhile increasing our access to potential future homesites and allowing us to participate in strategic ventures;•Acquiring land in conjunction with Lennar Multifamily; and•Acquiring assets from banks and opportunity funds, often through relationships established by our Rialto segment.At November 30, 2016, we owned 125,879 homesites and had access through option contracts to an additional 33,166 homesites, of which 26,650homesites were through option contracts with third parties and 6,516 homesites were through option contracts with unconsolidated entities in which we haveinvestments. At November 30, 2015, we owned 125,914 homesites and had access through option contracts to an additional 39,949 homesites, of which33,491 homesites were through option contracts with third parties and 6,458 homesites were through option contracts with unconsolidated entities in whichwe have investments.2Table of ContentsConstruction and DevelopmentThrough our own efforts and those of unconsolidated entities in which Lennar Homebuilding has investments, we are involved in all phases ofplanning and building in our residential communities, including land acquisition, site planning, preparation and improvement of land and design,construction and marketing of homes. We use independent subcontractors for most aspects of home construction. At November 30, 2016, we were activelybuilding and marketing homes in 695 communities, including two communities being constructed by unconsolidated entities.We generally supervise and control the development of land and the design and building of our residential communities with a relatively smalllabor force. We hire subcontractors for site improvements and virtually all of the work involved in the construction of homes. Arrangements with oursubcontractors generally provide that our subcontractors will complete specified work in accordance with price schedules and in compliance with applicablebuilding codes and laws. The price schedules may be subject to change to meet changes in labor and material costs or for other reasons. We believe that thesources and availability of raw materials to our subcontractors are adequate for our current and planned levels of operation. We generally do not own heavyconstruction equipment. We finance construction and land development activities primarily with cash generated from operations and debt issuances.For additional information about our investments in and relationships with unconsolidated entities, see Management’s Discussion and Analysis ofFinancial Condition and Results of Operations in Item 7 of this Report.MarketingWe offer a diversified line of homes for first-time, move-up, active adult and multi-generational homebuyers in a variety of locations ranging fromurban infill communities to suburban golf course communities. Our Everything’s Included® marketing program simplifies the home buying experience byincluding the most desirable features as standard items. This marketing program enables us to differentiate our homes from those of our competitors bycreating value through standard features and competitive pricing, while reducing construction and overhead costs through a simplified construction process,product standardization and volume purchasing. In addition, our advances in including solar powered technology and home automation in certain of thehomes we sell, enhance our brand and improve our ability to generate traffic and sales.We sell our homes primarily from models that we have designed and constructed. We employ new home consultants who are paid salaries,commissions or both to conduct on-site sales of our homes. We also sell homes through independent realtors.Most recently our marketing strategy has shifted to increase advertising through digital channels including paid search, display advertising, socialmedia and e-mail marketing, all of which drive traffic to our website, www.lennar.com. This has allowed us to attract more qualified and knowledgeablehomebuyers and has contributed to reduce selling, general and administrative expenses as a percentage of home sales revenues. However, we also continue toadvertise through more traditional media, including newspapers, radio advertisements and other local and regional publications and on billboards whereappropriate. We tailor our marketing strategy and message based on the community being advertised and the customers being targeted, such as advertisingour active adult communities in areas where prospective active adult homebuyers live or will potentially want to purchase.Quality ServiceWe continually strive to improve homeowner customer satisfaction throughout the pre-sale, sale, construction, closing and post-closing periods. Westrive to create a quality home buying experience for our customers through the participation of sales associates, on-site construction supervisors andcustomer care associates, all working in a team effort, which we believe leads to enhanced customer retention and referrals. The quality of our homes issubstantially affected by the efforts of on-site management and others engaged in the construction process, by the materials we use in particular homes and byother similar factors.We warrant our new homes against defective materials and workmanship for a minimum period of one year after the date of closing. Although wesubcontract virtually all segments of construction to others and our contracts call for the subcontractors to repair or replace any deficient items related to theirtrades, we are primarily responsible to the homebuyers for the correction of any deficiencies.Local Operating Structure and Centralized ManagementWe balance a local operating structure with centralized corporate level management. Our local operating structure consists of homebuildingdivisions across the country, which are generally managed by a division president, a controller and personnel focused on land entitlement, acquisition anddevelopment, sales, construction, customer service and purchasing. This local operating structure gives our division presidents and their teams, whogenerally have significant experience in the homebuilding industry, and in most instances, in their particular markets, the flexibility to make local operatingdecisions,3Table of Contentsincluding land identification, entitlement and development, the management of inventory levels for our current sales volume, community development,home design, construction and marketing of our homes. We centralize at the corporate level decisions related to our overall strategy, acquisitions of land andbusinesses, risk management, financing, cash management and information systems.BacklogBacklog represents the number of homes under sales contracts. Homes are sold using sales contracts, which are generally accompanied by deposits.In some instances, purchasers are permitted to cancel sales contracts if they fail to qualify for financing or under certain other circumstances. We experienceda cancellation rate of 16% in 2016, compared to 16% and 17% in 2015 and 2014, respectively. We do not recognize revenue on homes under sales contractsuntil the sales are closed and title passes to the new homeowners.The backlog dollar value including unconsolidated entities at November 30, 2016 was $2.9 billion, compared to $2.5 billion at November 30, 2015and $2.0 billion at November 30, 2014. We expect that substantially all homes currently in backlog will be delivered in fiscal year 2017.Lennar Homebuilding Investments in Unconsolidated EntitiesWe create and participate in joint ventures that acquire and develop land for our homebuilding operations, for sale to third parties or for use in theirown homebuilding operations. Through these joint ventures, we reduce the amount we invest in order to assure access to potential future homesites, therebymitigating certain risks associated with land acquisitions, and, in some instances, we obtain access to land to which we could not otherwise have obtainedaccess or could not have obtained access on as favorable terms. As of November 30, 2016 and 2015, we had 38 and 34 Lennar Homebuilding unconsolidatedjoint ventures, respectively, in which we were participating, and our maximum recourse debt exposure related to Lennar Homebuilding unconsolidated jointventures was $52.4 million and $11.0 million, respectively.Homebuilding Ancillary BusinessesWe have homebuilding ancillary business activities that are related to our homebuilding business, but are not components of our core homebuildingoperations.FivePoint - On May 2, 2016, we, through our wholly-owned subsidiaries, contributed, or obtained the right to contribute, our investments in threestrategic joint ventures which include the entities that own the Newhall Ranch, Great Park Neighborhoods, and The San Francisco Shipyard and CandlestickPoint (the "Shipyard Venture") master planned mixed-used developments in California previously managed by FivePoint Communities, in exchange for aninvestment in a FivePoint entity, which is currently included within our Lennar Homebuilding unconsolidated entities. A portion of the assets in theShipyard Venture was retained by us and our Shipyard Venture partner.Sunstreet - Our solar business is focused on providing homeowners through solar purchases or lease programs, high-efficiency solar power systemsthat generate much of a home's annual expected energy needs. In fiscal 2016, Sunstreet expanded its operations into Florida, Oregon and Washington andexited its Nevada operations due to regulation changes. In addition to these states, Sunstreet also operates in California, Colorado, Maryland and Texas.Lennar Financial Services OperationsMortgage FinancingWe offer conforming conventional, FHA-insured and VA-guaranteed residential mortgage loan products and other home mortgage products tobuyers of our homes and others through our financial services subsidiary, Universal American Mortgage Company, LLC, which includes Universal AmericanMortgage Company, LLC, d/b/a Eagle Home Mortgage, from locations in most of the states in which we have homebuilding operations, as well as some otherstates. In 2016, our financial services subsidiaries provided loans to 82% of our homebuyers who obtained mortgage financing in areas where we offeredservices. Because of the availability of mortgage loans from our financial services subsidiaries, as well as from independent mortgage lenders, we believealmost all credit worthy potential purchasers of our homes have access to financing.During 2016, we originated approximately 33,500 residential mortgage loans totaling $9.3 billion, compared to 32,600 residential mortgage loanstotaling $8.9 billion during 2015. Substantially all of the residential mortgage loans we originate are sold within a short period in the secondary mortgagemarket, the majority of which are sold on a servicing released, non-recourse basis. After the loans are sold, we retain potential liability for possible claims bypurchasers that we breached certain limited industry-standard representations and warranties in the loan sale agreements.We finance our mortgage loan activities with borrowings under our financial services warehouse facilities or from our operating funds. AtNovember 30, 2016, our Lennar Financial Services had three warehouse facilities maturing at various dates through fiscal 2017 with a total maximumaggregate commitment of $1.3 billion including an uncommitted amount of $2504Table of Contentsmillion. We expect the facilities to be renewed or replaced with other facilities when they mature. We have a corporate risk management policy under whichwe hedge our interest rate risk on rate-locked loan commitments and loans held-for-sale to mitigate exposure to interest rate fluctuations.Title and Other Insurance and Closing ServicesWe provide title insurance and closing services to our homebuyers and others. During 2016, we provided title and closing services forapproximately 116,000 real estate transactions, and issued approximately 298,900 title insurance policies through our underwriter, North American TitleInsurance Company, compared to 108,600 real estate transactions and 263,500 title insurance policies during 2015. Title and closing services by agencysubsidiaries are provided in Alabama, Arizona, California, Colorado, Delaware, District of Columbia, Georgia, Florida, Illinois, Indiana, Iowa, Kansas,Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Jersey, New York, NorthCarolina, North Dakota, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, West Virginia and Wisconsin. Title insurance services areprovided in 40 states.We also provide our homebuyers and others with personal lines, property and casualty insurance products through our insurance agency subsidiary,North American Advantage Insurance Services, LLC, which operates in the same states as our homebuilding divisions, as well as other states. During 2016and 2015, we issued, as agent, approximately 13,500 and 10,700 new homeowner policies, respectively, and renewed approximately 27,700 and 17,200homeowner policies, respectively.Rialto OperationsThe Rialto segment is a commercial real estate, investment management, and finance company. Rialto’s primary focus is to manage third-partycapital and to originate commercial mortgage loans which it sells into securitizations. It also has invested its own capital in mortgage loans, properties andreal estate related securities.Rialto is the sponsor of and an investor in private equity vehicles, listed in the table below, that invest in and manage real estate related assets andother related investments:Private Equity VehicleInception YearCommitmentRialto Real Estate Fund, LP2010$700 million (including $75 million by us)Rialto Real Estate Fund II, LP2012$1.3 billion (including $100 million by us)Rialto Mezzanine Partners Fund, LP2013$300 million (including $34 million by us)Rialto Capital CMBS Funds2014$119 million (including $52 million by us)Rialto Real Estate Fund III2015$1.3 billion (including $100 million by us)Rialto Credit Partnership, LP2016$220 million (including $20 million by us)Rialto also earns fees for its role as a manager of these vehicles and for providing asset management and other services to those vehicles and otherthird parties. In addition, Rialto owns general partner interests in each of the funds, which entitle it to a share of the sums distributed by the funds afterinvestors have recovered their investments and received specified internal rates of return on those investments ("carried interests"). During the years endedNovember 30, 2016, 2015 and 2014, Rialto received $10.1 million, $20.0 million and $34.7 million, respectively, of advance distributions with regard to itscarried interests in its real estate funds in order to cover income tax obligations resulting from allocations of taxable income to Rialto's carried interests inthese funds. These advance distributions are not subject to clawbacks but will reduce future carried interest payments to which Rialto becomes entitled fromthe applicable funds.For Funds I, II and III, in order to protect investors in the Funds, we agreed that while the Funds were seeking investments (which no longer is thecase with regard to Fund I and Fund II) we would not make investments that are suitable for the applicable Fund, except to the extent an Advisory Committeeof the Fund decides that the Fund should not make particular investments, with an exception enabling us to purchase properties for use in connection withour homebuilding operations.Rialto Mortgage Finance ("RMF") originates and sells into securitizations five, seven and ten year commercial first mortgage loans, generally withprincipal amounts between $2 million and $75 million, which are secured by income producing properties. RMF also originates floating rate loans securedby commercial real estate properties, many of which are undergoing transition, including properties undergoing lease-up, sell-out and renovation orrepositioning. In order to finance RMF lending activities, as of November 30, 2016, RMF has secured four warehouse repurchase financing agreementsmaturing between 2017 and 2018 with commitments totaling $1.1 billion, which includes $100 million for floating rate loans.5Table of ContentsLennar Multifamily OperationsWe have been actively involved, primarily through unconsolidated entities, in the development, construction and property management ofmultifamily rental properties. Our Lennar Multifamily segment focuses on developing a geographically diversified portfolio of institutional qualitymultifamily rental properties in select U.S. markets.During the year ended November 30, 2016, our Lennar Multifamily segment continued to grow as a leading developer of apartment communitiesacross the country with interests in 53 communities with development costs of approximately $4.8 billion, of which five communities were completed andoperating, 13 communities were partially completed and leasing, 24 communities were under construction and the remaining communities were either ownedor under contract. As of November 30, 2016, our Lennar Multifamily segment had a pipeline of future projects totaling $2.8 billion in assets across a numberof states that will be developed primarily by unconsolidated entities.Our Lennar Multifamily segment had equity investments in 28 and 29 unconsolidated entities (including the Lennar Multifamily Venture, describedbelow) as of November 30, 2016 and 2015, respectively. During the year ended November 30, 2016, our Lennar Multifamily segment sold seven operatingproperties through its unconsolidated entities resulting in the segment's $91.0 million share of gains included within Lennar Multifamily equity in earningsfrom unconsolidated entities. During the years ended November 30, 2015 and 2014, our Lennar Multifamily segment sold two operating properties each yearthrough its unconsolidated entities resulting in the segment's $22.2 million and $14.7 million share of gains included within Lennar Multifamily equity inearnings from unconsolidated entities, respectively.In 2015, the Lennar Multifamily segment completed the initial closing of the Lennar Multifamily Venture (the "Venture") for the development,construction and property management of class-A multifamily assets with $1.1 billion of commitments. During the year ended November 30, 2016, theVenture received an additional $1.1 billion of equity commitments completing the fund raising for the Venture and increasing its total commitments to $2.2billion, including a $504 million co-investment commitment by us. As of November 30, 2016, $931.6 million of the $2.2 billion in equity commitments hadbeen called, of which we have contributed $215.8 million representing our pro-rata portion of the called equity, resulting in a remaining equity commitmentfor us of $288.2 million.For additional information about our investments in and relationships with unconsolidated entities, see Management’s Discussion and Analysis ofFinancial Condition and Results of Operations in Item 7 of this Report.SeasonalityWe historically have experienced, and expect to continue to experience, variability in quarterly results. Our homebuilding business is seasonal innature and generally reflects higher levels of new home order activity in our second fiscal quarter and increased deliveries in the second half of our fiscalyear. However, periods of economic downturn in the industry can alter seasonal patterns.CompetitionThe residential homebuilding industry is highly competitive. We compete for homebuyers in each of the market regions where we operate withnumerous national, regional and local homebuilders, as well as with resales of existing homes and with the rental housing market. We compete forhomebuyers on the basis of a number of interrelated factors including location, price, reputation, amenities, design, quality and financing. In addition tocompetition for homebuyers, we also compete with other homebuilders for desirable properties, raw materials and access to reliable, skilled labor. Wecompete for land buyers with third parties in our efforts to sell land to homebuilders and others. We believe we are competitive in the market regions wherewe operate primarily due to our:•Everything’s Included® marketing program, which simplifies the home buying experience by including most desirable features as standarditems;•Innovative home designs, such as our Next Gen® homes that provide both privacy and togetherness for the multi-generational families;•Financial position, where we continue to focus on inventory management and liquidity;•Access to land, particularly in land-constrained markets;•Access to distressed assets, primarily through relationships established by our Rialto segment;•Pricing to current market conditions through sales incentives offered to homebuyers;•Cost efficiencies realized through our national purchasing programs and production of value-engineered homes; and•Quality construction and home warranty programs, which are supported by a responsive customer care team.6Table of ContentsOur financial services operations compete with other mortgage lenders, including national, regional and local mortgage bankers and brokers, banks,savings and loan associations and other financial institutions, in the origination and sale of residential mortgage loans. Principal competitive factors includeinterest rates and other features of mortgage loan products available to the consumer. We compete with other title insurance agencies and underwriters forclosing services and title insurance. Principal competitive factors include service and price.The business of Rialto, and the funds it manages, of purchasing distressed real estate related assets is highly competitive and fragmented. A numberof entities and funds have been formed in recent years for the purpose of acquiring real estate related assets and it is likely that additional entities and fundswill be formed for this purpose during the next several years. We compete in the marketplace for assets based on many factors, including purchase price,representations, warranties and indemnities, timeliness of purchase decisions and reputation. In marketing of real estate investment funds we sponsor, wecompete with a large variety of asset managers, including banks and other financial institutions and real estate investment firms. Rialto’s RMF businesscompetes with other commercial mortgage lenders in a competitive market and its profitability depends on our ability to originate commercial real estateloans and sell them into securitizations at attractive prices.Some of Rialto's competitors are substantially larger and have a lower cost of funds and greater financial, technical, marketing and other resourcesthan Rialto and have access to funding sources that may not be available to Rialto. In addition, some of Rialto's competitors may have higher risk tolerancesor make different risk assessments, than Rialto does, which could allow them to consider a wider variety of investments and establish more relationships thanRialto.We believe that our major distinction from many of our competitors is that Rialto's team is made up of experienced managers who engage in workingout and /or adding value to real estate assets and have been doing that for several years. RMF business is made up of highly seasoned managers who havebeen originating and securitizing loans for over 25 years with long-standing relationships and can leverage Rialto’s/Lennar’s infrastructure facilities for arapid market entrance as well as Rialto’s current underwriting platform. Additionally, because we are a lender or capital provider to developers, we believehaving our homebuilding team participating in the underwriting process provides us with a distinct advantage in our evaluation of real estate assets. Webelieve that our experienced team and the infrastructure already in place give the Rialto segment an advantage and position the segment well when comparedto a number of our competitors.Our multifamily operations compete with other multifamily apartment developers and operators, including REITs, across the United States. Inaddition, our multifamily operations compete in securing capital, partners and equity, and in securing tenants within the large supply of already existingrental apartments. Principal competitive factors include location, rental price and quality, and management of the apartment buildings.RegulationThe residential communities and multifamily apartment developments that we build are subject to a large variety of local, state and federal statutes,ordinances, rules and regulations relating to, among other things, zoning, construction permits or entitlements, construction materials, density, buildingdesign and property elevation, building codes and handling of waste. These include laws requiring the use of construction materials that reduce the need forenergy-consuming heating and cooling systems. These laws and regulations are subject to frequent change and often increase construction costs. In someinstances, we must comply with laws that require commitments from us to provide roads and other offsite infrastructure, and may require them to be in placeprior to the commencement of new construction. These laws and regulations are usually administered by counties and municipalities and may result in feesand assessments or building moratoriums. In addition, certain new development projects are subject to assessments for schools, parks, streets and highwaysand other public improvements, the costs of which can be substantial. Also, some states are attempting to make homebuilders responsible for violations ofwage and other labor laws by their subcontractors. Recent National Labor Relations Board decisions may give support to these efforts if they are upheld onappeal.Residential homebuilding and apartment development are also subject to a variety of local, state and federal statutes, ordinances, rules andregulations concerning the protection of health and the environment. These environmental laws include such areas as storm water and surface watermanagement, soil, groundwater and wetlands protection, subsurface conditions and air quality protection and enhancement. Environmental laws and existingconditions may result in delays, may cause us to incur substantial compliance and other costs and may prohibit or severely restrict homebuilding activity inenvironmentally sensitive regions or areas. For example, a 2015 decision of the California Supreme Court will delay the start of a California master plannedmixed-use development in which we have an investment.In recent years, several cities and counties in which we have developments have submitted to voters "slow growth" initiatives and other ballotmeasures that could impact the affordability and availability of land suitable for residential development within those localities. Although many of theseinitiatives have been defeated, we believe that if similar initiatives were approved, residential construction by us and others within certain cities or countiescould be seriously impacted.7Table of ContentsIn order to make it possible for some of our homebuyers to obtain FHA-insured or VA-guaranteed mortgages, we must construct the homes they buyin compliance with regulations promulgated by those agencies. Various states have statutory disclosure requirements relating to the marketing and sale ofnew homes. These disclosure requirements vary widely from state-to-state. In addition, some states require that each new home be registered with the state ator before the time title is transferred to a buyer (e.g., the Texas Residential Construction Commission Act). In some states, we are required to be registered as alicensed contractor and comply with applicable rules and regulations. In various states, our new home consultants are required to be registered as licensedreal estate agents and to adhere to the laws governing the practices of real estate agents.Our mortgage and title subsidiaries must comply with applicable real estate, lending and insurance laws and regulations. The subsidiaries arelicensed in the states in which they do business and must comply with laws and regulations in those states. These laws and regulations include provisionsregarding capitalization, operating procedures, investments, lending and privacy disclosures, forms of policies and premiums. The Dodd-Frank Wall StreetReform and Consumer Protection Act contains a number of requirements relating to mortgage lending and securitizations. These include, among others,minimum standards for lender practices, limitations on certain fees and a requirement that the originator of loans that are securitized retain a portion of therisk, either directly or by holding interests in the securitizations.Several federal, state and local laws, rules, regulations and ordinances, including, but not limited to, the Federal Fair Debt Collection Practices Act("FDCPA") and the Federal Trade Commission Act and comparable state statutes, regulate consumer debt collection activity. Although, for a variety ofreasons, we may not be specifically subject to the FDCPA or certain state statutes that govern debt collectors, it is our policy to comply with applicable lawsin our collection activities. To the extent that some or all of these laws apply to our collection activities, our failure to comply with such laws could have amaterial adverse effect on us. We are also subject to regulations promulgated by the Federal Consumer Financial Protection Bureau regarding residentialmortgage loans.Because Rialto manages real estate asset investments, mezzanine loan and commercial mortgage-backed securities ("CMBS") funds and two entitiespartly owned by the FDIC, one of Rialto's entities is registered as an investment adviser under the Investment Advisers Act of 1940. This Act has requirementsrelated to dealings between investment advisers and the entities they advise and imposes record keeping and disclosure obligations on investment advisers.Our RMF subsidiary must comply with laws and regulations applicable to commercial mortgage lending. Rialto or its subsidiaries must be licensed in statesin which they make loans and must comply with laws and regulations in those states.AssociatesAt November 30, 2016, we employed 8,335 individuals of whom 4,351 were involved in the Lennar Homebuilding operations, 3,224 were involvedin the Lennar Financial Services operations, 365 were involved in the Rialto operations and 395 were involved in the Lennar Multifamily operations,compared to November 30, 2015, when we employed 7,749 individuals of whom 4,138 were involved in the Lennar Homebuilding operations, 2,914 wereinvolved in the Lennar Financial Services operations, 392 were involved in the Rialto operations and 305 were involved in the Lennar Multifamilyoperations. We do not have collective bargaining agreements relating to any of our associates. However, we subcontract many phases of our homebuildingoperations and some of the subcontractors we use have employees who are represented by labor unions.NYSE CertificationOn April 15, 2016, we submitted our Annual CEO Certification to the New York Stock Exchange ("NYSE") in accordance with NYSE's listingstandards. The certification was not qualified in any respect.Item 1A.Risk Factors.The following are what we believe to be the principal risks that could materially affect us and our businesses.Market and Economic RisksThe homebuilding recovery has continued its progression at a slow and steady pace; however, a downturn in the recovery or decline in economicconditions could adversely affect our operations.In fiscal 2016, we continued to experience a steadily improving housing market, and we saw increases in new sales contracts signed and homesdelivered compared with the prior year. However, demand for new homes is sensitive to changes in economic conditions such as the level of employment,consumer confidence, consumer income, the availability of financing and interest rate levels. The prior economic downturn severely affected both thenumbers of homes we could sell and the prices for which we could sell them. We cannot predict whether the recovery in the housing market will continue. Ifthe recovery were to slow or stop, or there were another economic downturn, the resulting decline in demand for new homes would negatively impact ourbusiness, results of operations and financial condition.8Table of ContentsDuring the prior economic downturn, we had to take significant write-downs on the carrying values of land we owned and of option values. A futuredecline in land values could result in similar write-downs.Inventory risks are substantial for our homebuilding business. There are risks inherent in controlling, owning and developing land and if housingdemand declines, we may own land or homesites we acquired at costs we will not be able to recover fully, or on which we cannot build and sell homesprofitably. This is particularly true when entitled land becomes increasingly scarce, as it has recently, and the cost of purchasing such land may be relativelyhigh. Also, there can be significant fluctuations in the value of our owned undeveloped land, building lots and housing inventories related to changes inmarket conditions. As a result, our deposits for building lots controlled under option or similar contracts may be put at risk, we may have to sell homes orland for lower than anticipated profit margins or we may have to record inventory impairment charges with regard to our developed and undeveloped landand lots. When demand for homes fell during the most recent recession, we were required to take significant write-downs of the carrying value of our landinventory and we elected not to exercise many options to purchase land, even though that required us to forfeit deposits and write-off pre-acquisition costs.Although we have reduced our exposure to costs of that type, a certain amount of exposure is inherent in our homebuilding business. If market conditionswere to deteriorate significantly in the future, we could again be required to make significant write downs with regard to our land inventory, which woulddecrease the asset values reflected on our balance sheet and adversely affect our earnings and our stockholders' equity.Inflation may adversely affect us by increasing costs beyond what we can recover through price increases.Inflation can adversely affect us by increasing costs of land, materials and labor. In addition, significant inflation is often accompanied by higherinterest rates, which have a negative impact on demand for our homes. In an inflationary environment, depending on homebuilding industry and othereconomic conditions, we may be precluded from raising home prices enough to keep up with the rate of inflation, which would reduce our profit margins.Although the rate of inflation has been low for the last several years, in recent years we have been experiencing increases in the prices of labor and materialsabove the general inflation rate.Homebuilding, mortgage lending, distressed asset investing and multifamily rentals are very competitive industries, and competitive conditions couldadversely affect our business or financial results.Homebuilding. The homebuilding industry is highly competitive. Homebuilders compete not only for homebuyers, but also for desirable land,financing, raw materials, skilled management and labor resources. We compete in each of our markets with numerous national, regional and localhomebuilders. We also compete with sellers of existing homes, including foreclosed homes, and with rental housing. These competitive conditions canreduce the number of homes we deliver, negatively impact our selling prices, reduce our profit margins, and cause impairments in the value of our inventoryor other assets. Competition can also affect our ability to acquire suitable land, raw materials and skilled labor at acceptable prices or other terms.Lennar Financial Services. Our Lennar Financial Services business competes with other mortgage lenders, including national, regional and localbanks and other financial institutions. Mortgage lenders who have greater access to low cost funds, superior technologies or different lending criteria than wedo may be able to offer more attractive financing to potential customers than we can.Rialto. There are many firms and investment funds that compete with Rialto in trying to acquire distressed mortgage debt, foreclosed properties andother real estate related assets. At least some of the firms with which Rialto competes, or will compete, for investment opportunities have, or will have, a costof funds or targeted investment return that is lower than that of Rialto or the funds it manages, and therefore those firms may be able to pay more forinvestment opportunities than would be prudent for Rialto or the funds it manages. Our RMF business competes with national and regional banks as well assmaller community banks within the various markets in which we operate and non-bank lenders, many of which are far larger than RMF or have access tolower cost funds than we do.Lennar Multifamily. Our multifamily rental business competes with other multifamily apartment developers and operators at locations across theUnited States where we have investments in rental properties. We also compete in securing partners, equity capital and debt financing, and we compete insecuring tenants with the large supply of already existing or newly built rental apartments, as well as with sellers of homes. These competitive conditionscould negatively impact the ability of the ventures in which we are participating to find renters for the apartments they are building or the prices for whichthose apartments can be rented.Operational RisksWe may be subject to significant potential liabilities as a result of warranty and liability claims made against us.As a homebuilder, we are subject in the ordinary course of our business to warranty and construction defect claims. We are also subject to claims forinjuries that occur in the course of construction activities. We record warranty and other reserves for the homes we sell based on historical experience in ourmarkets and our judgment of the qualitative risks associated with the9Table of Contentstypes of homes we build. We have, and many of our subcontractors have, general liability, property, workers compensation and other business insurance.These insurance policies are intended to protect us against a portion of our risk of loss from claims, subject to certain self-insured retentions, deductibles andcoverage limits. However, it is possible that this insurance will not be adequate to address all warranty, construction defect and liability claims to which weare subject. Additionally, the coverage offered and the availability of general liability insurance for construction defects are currently limited and policiesthat can be obtained are costly and often include exclusions based upon past losses those insurers suffered as a result of use of defective products in homes weand many other homebuilders built. As a result, an increasing number of our subcontractors are unable to obtain insurance, and we have in many cases had towaive our customary insurance requirements, which increases our and our insurers’ exposure to claims and increases the possibility that our insurance will notbe adequate to protect us for all the costs we incur.Products supplied to us and work done by subcontractors can expose us to risks that could adversely affect our business.We rely on subcontractors to perform the actual construction of our homes, and in many cases, to select and obtain building materials. Despite ourdetailed specifications and quality control procedures, in some cases, subcontractors may use improper construction processes or defective materials.Defective products widely used by the homebuilding industry can result in the need to perform extensive repairs to large numbers of homes. The cost ofcomplying with our warranty obligations may be significant if we are unable to recover the cost of repairs from subcontractors, materials suppliers andinsurers.We also can suffer damage to our reputation, and may be exposed to possible liability, if subcontractors fail to comply with applicable laws,including laws involving things that are not within our control. When we learn about possibly improper practices by subcontractors, we try to cause thesubcontractors to discontinue them. However, we are not always able to do that, and even when we can, it may not avoid claims against us relating to whatthe subcontractors already did.Supply shortages and risks related to the demand for skilled labor and building materials could increase costs and delay deliveries.Increased costs or shortages of skilled labor and/or lumber, framing, concrete, steel and other building materials could cause increases inconstruction costs and construction delays. During 2016, we experienced increases in the prices of some building materials and shortages of skilled labor insome areas. We generally are unable to pass on increases in construction costs to customers who have already entered into purchase contracts, as thosecontracts generally fix the price of the homes at the time the contracts are signed, which may be well in advance of the construction of the homes. Sustainedincreases in construction costs may, over time, erode our margins, particularly if pricing competition or weak demand restricts our ability to pass additionalcosts of materials and labor on to homebuyers.Reduced numbers of home sales extend the time it takes us to recover land purchase and property development costs.We incur many costs even before we begin to build homes in a community. Depending on the stage of development a land parcel is in when weacquire it, these may include costs of preparing land, finishing and entitling lots, installing roads, sewers, water systems and other utilities, taxes and othercosts related to ownership of the land on which we plan to build homes. If the rate at which we sell and deliver homes slows, or if we delay the opening of newhome communities, we may incur additional pre-construction costs and it may take longer for us to recover our costs.Increased demand for homes could require us to increase our corporate credit line, and our inability to do that could limit our ability to take fulladvantage of market opportunities.Our business requires that we be able to finance the development of our residential communities. One of the ways we do this is with bankborrowings. At November 30, 2016, we had a $1.8 billion revolving credit facility with a group of banks (the "Credit Facility"), which includes a $298million accordion feature, subject in part to additional commitments. If market conditions strengthen to the point that we need additional funding but we arenot able to increase our Credit Facility or obtain funds from other types of financings, that could prevent us from taking full advantage of the enhancedmarket opportunities.Failure to comply with the covenants and conditions imposed by our credit facilities could restrict future borrowing or cause our debt to becomeimmediately due and payable.The agreement governing our Credit Facility (the "Credit Agreement") makes it a default if we fail to pay principal or interest when it is due (subjectin some instances to grace periods) or to comply with various covenants, including covenants regarding financial ratios. In addition, our Lennar FinancialServices segment has warehouse facilities to finance its lending activities and our Rialto segment has warehouse facilities to finance its mortgage originationactivities. If we default under the Credit Agreement or our warehouse facilities, the lenders will have the right to terminate their commitments to lend and torequire immediate repayment of all outstanding borrowings. This could reduce our available funds at a time when we are having difficulty generating all thefunds we need from our operations, in capital markets or otherwise, and restrict our ability to obtain financing in the future. Further, Rialto's 7.00% seniornotes due 2018 contain restrictive covenants imposing operational10Table of Contentsand financial restrictions on our Rialto segment, including restrictions that may limit Rialto’s ability to sell assets, pay dividends or make other distributions,enter into transactions with affiliates or incur additional indebtedness. In addition, if we default under the Credit Agreement or our warehouse facilities, itcould cause the amounts outstanding under our senior notes to become immediately due and payable, which would have a material adverse impact on ourconsolidated financial condition.We have a substantial level of indebtedness which may have an adverse effect on our business or limit our ability to take advantage of business, strategicor financing opportunities.As of November 30, 2016, our consolidated debt, net of debt issuance costs, and excluding amounts outstanding under our credit facilities, was $5.0billion. The indentures governing our senior notes do not restrict our incurrence of future secured or unsecured debt, and the agreement governing our CreditFacility allows us to incur a substantial amount of future unsecured debt. Our substantial level of indebtedness increases the possibility that we may beunable to generate cash sufficient to pay the principal, interest or other amounts due on our indebtedness. Our reliance on debt to help support our operationsexposes us to a number of risks, including:•we may be more vulnerable to general adverse economic and homebuilding industry conditions;•we may have to pay higher interest rates upon refinancing indebtedness if interest rates rise, thereby reducing our earnings and cash flows;•we may find it difficult to, or may be unable to, obtain additional financing to fund future working capital, capital expenditures and othergeneral corporate requirements that would be in our best long-term interests;•we may be required to dedicate a substantial portion of our cash flow from operations to the payment of principal and interest on our debt,reducing the cash flow available to fund operations and investments;•we may have reduced flexibility in planning for, or reacting to, changes in our businesses or the industries in which they are conducted;•we may have a competitive disadvantage relative to other companies in our industry that are less leveraged; and•we may be required to sell debt or equity securities or sell some of our core assets, possibly on unfavorable terms, in order to meet paymentobligations.Our inability to obtain performance bonds could adversely affect our results of operations and cash flows.We often are required to provide surety bonds to secure our performance or obligations under construction contracts, development agreements andother arrangements. At November 30, 2016, we had outstanding surety bonds of $1.4 billion including performance surety bonds related to siteimprovements at various projects (including certain projects of our joint ventures) and financial surety bonds including $223.4 million related to pendinglitigation. Although significant development and construction activities have been completed related to these site improvements, these bonds are generallynot released until all development and construction activities are completed. Our ability to obtain surety bonds primarily depends upon our credit rating,financial condition, past performance and similar factors, the capacity of the surety market and the underwriting practices of surety bond issuers. The abilityto obtain surety bonds also can be impacted by the willingness of insurance companies to issue performance bonds for construction and developmentactivities. If we are unable to obtain surety bonds when required, our results of operations and cash flows could be adversely affected.Our Lennar Financial Services segment and RMF have warehouse facilities that mature between 2017 and 2018, and if we cannot renew or replace thesefacilities, we may have to reduce our mortgage lending and origination activities.Our Lennar Financial Services segment has an aggregate committed and uncommitted amount under three warehouse repurchase credit facilities thattotaled $1.3 billion as of November 30, 2016, all of which will mature during 2017. Our Lennar Financial Services segment uses these facilities to finance itsmortgage lending activities until the mortgage loans it originates are sold to investors. In addition, RMF, the commercial mortgage lender in our Rialtosegment, has an aggregate committed amount under four warehouse repurchase credit facilities that totaled $1.1 billion as of November 30, 2016, all of whichwill mature between 2017 and 2018. RMF uses these facilities primarily to finance its mortgage origination activities. We expect these facilities to berenewed or replaced with other facilities when they mature. If we were unable to renew or replace these facilities on favorable terms or at all when they mature,that could seriously impede the activities of our Lennar Financial Services segment and RMF, as applicable, which would have a material adverse impact onour financial results.We conduct some of our operations through joint ventures with independent third parties and we can be adversely impacted by our joint venture partners'failures to fulfill their obligations or decisions to act contrary to our wishes.In our Homebuilding and Lennar Multifamily segments, we participate in joint ventures in order to help us acquire attractive land positions, tomanage our risk profile and to leverage our capital base. In certain circumstances, the joint venture participants, including ourselves, are required to provideguarantees of obligations relating to the joint ventures, such as completion and environmental guarantees. If a joint venture partner does not perform itsobligations, we may be required to bear more than our proportional share of the cost of fulfilling them. For example, in connection with our LennarMultifamily11Table of Contentsbusiness, and its joint ventures, we and the other venture participants have assumed certain obligations to complete construction of multifamily residentialbuildings at agreed upon costs, which could make us and the other venture participants responsible for cost over-runs. Although all the participants in aventure are normally responsible for sharing the costs of fulfilling obligations of that type, if some of the venture participants are unable or unwilling to meettheir share of the obligations, we may be held responsible for some or all of the defaulted payments. In addition, because we do not have a controlling interestin most of the joint ventures in which we participate, we may not be able to cause joint ventures to sell assets, return invested capital or take other actionswhen such actions might be in our best interest.Several of the joint ventures in which we participate will in the relatively near future be required to repay, refinance, renegotiate or extend theirborrowings. If any of those joint ventures are unable to do this, we could be required to provide at least a portion of the funds the joint ventures need to beable to repay the borrowings and to conduct the activities for which they were formed, which could adversely affect our financial position.The loss of the services of members of our senior management or a significant number of our employees could negatively affect our business.Our success depends to a significant extent upon the performance and active participation of our senior management, many of whom have been withthe Company for a significant number of years. If we were to lose members of our senior management, we might not be able to find appropriate replacementson a timely basis and our operations could be negatively affected. Also, the loss of a significant number of operating employees and our inability to hirequalified replacements could have a material adverse effect on our business.Our access to capital and our ability to obtain additional financing could be affected by any downgrade of our credit ratings.Our corporate credit rating and ratings of our senior notes affect, among other things, our ability to access new capital, especially debt, and the costsof that new capital. A substantial portion of our access to capital is through the issuance of senior notes, of which we have $4.4 billion outstanding, net ofdebt issuance costs, and excluding Rialto's 7.00% senior notes due 2018, as of November 30, 2016. Among other things, we rely on proceeds of debtissuances to pay the principal of existing senior notes when they mature. Negative changes in the ratings of our senior notes could make it difficult for us tosell senior notes in the future and could result in more stringent covenants and higher interest rates with regard to new senior notes we issue.Natural disasters and severe weather conditions could delay deliveries and increase costs of new homes in affected areas, which could harm our sales andresults of operations.Many of our homebuilding operations are conducted in areas that are subject to natural disasters, including hurricanes, earthquakes, droughts,floods, wildfires and severe weather. The occurrence of natural disasters or severe weather conditions can delay new home deliveries, increase costs bydamaging inventories and lead to shortages of labor and materials in areas affected by the disasters, and can negatively impact the demand for new homes inaffected areas. If our insurance does not fully cover business interruptions or losses resulting from these events, our results of operations could be adverselyaffected.If our homebuyers are not able to obtain suitable financing, that would reduce demand for our homes and our home sales revenues.Most purchasers of our homes obtain mortgage loans to finance a substantial portion of the purchase price of the homes they purchase. While themajority of our homebuyers obtain their mortgage financing from Lennar Financial Services, others obtain mortgage financing from banks and otherindependent lenders. The uncertainties in the mortgage markets and increased government regulation could adversely affect the ability of potentialhomebuyers to obtain financing for home purchases, thus preventing them from purchasing our homes. Among other things, changes made by Fannie Mae,Freddie Mac and FHA/VA to sponsored mortgage programs, as well as changes made by private mortgage insurance companies, have reduced the ability ofmany potential homebuyers to qualify for mortgages. Principal among these are higher income requirements, larger required down payments, increasedreserves and higher required credit scores. In addition, there continues to be uncertainty regarding the future of Fannie Mae and Freddie Mac, includingproposals that they reduce or terminate their role as the principal sources of liquidity in the secondary market for mortgage loans. It is not clear how, if FannieMae and Freddie Mac were to curtail their secondary market mortgage loan purchases, the liquidity they provide would be replaced. There is a substantialpossibility that substituting an alternate source of liquidity would increase mortgage interest rates, which would increase the buyers' effective costs of thehomes we sell, and therefore could reduce demand for our homes and adversely affect our results of operations.12Table of ContentsOur Lennar Financial Services segment can be adversely affected by reduced demand for our homes or by a slowdown in mortgage refinancings.Approximately 55% of the mortgage loans made by our Lennar Financial Services segment in 2016 were made to buyers of homes we built.Therefore, a decrease in the demand for our homes would adversely affect the revenues of this segment of our business. In addition, the revenues of ourLennar Financial Services segment would be adversely affected by a decrease in refinance transactions, if mortgage interest rates rise.If our ability to sell mortgages into the secondary market is impaired, that could significantly reduce our ability to sell homes unless we are willing tobecome a long-term investor in loans we originate.Substantially all of the residential mortgage loans we originate are sold within a short period in the secondary mortgage market on a servicingreleased, non-recourse basis. If we became unable to sell loans into the secondary mortgage market or directly to Fannie Mae and Freddie Mac, we wouldhave to either curtail our origination of mortgage loans, which among other things, could significantly reduce our ability to sell homes, or commit our ownfunds to long term investments in mortgage loans, which, in addition to requiring us to deploy substantial amounts of our own funds, could delay the timewhen we recognize revenues from home sales on our statements of operations.We may be liable for certain limited representations and warranties we make in connection with sale of loans.While substantially all of the residential mortgage loans we originate are sold within a short period in the secondary mortgage market on a servicingreleased, non-recourse basis, we remain responsible for certain limited representations and warranties we make in connection with such sales. Mortgageinvestors could seek to have us buy back mortgage loans or compensate them for losses incurred on mortgage loans that we have sold based on claims that webreached our limited representations or warranties. In addition, when our Rialto segment sells loans to securitization trusts or other purchasers, it giveslimited industry standard representations and warranties about the loans, which, if incorrect, may require it to repurchase the loans, replace them withsubstitute loans or indemnify persons for losses or expenses incurred as a result of breaches of representations and warranties. If we have significant liabilitieswith respect to such claims, it could have an adverse effect on our results of operations, and possibly our financial condition.New mortgage products that we may offer may expose us to liability.Through our Lennar Financial Services segment, we offer non-Qualified Mortgage loan products which, unlike Qualified Mortgages, do not benefitfrom a presumption that when the loan is made the borrower has the ability to repay the loan. While we have taken substantial steps to try to mitigateexposure to bad credits and to insure that as to each loan we have made a reasonable determination that the borrower will have the ability to repay the loan,this type of product has increased risk and exposure to litigation and claims of borrowers. If we were to make a loan as to which we did not satisfy theregulatory standards for ascertaining the borrower's ability to repay the loan, the consequences could include giving the borrower a defense to repayment ofthe loan, which might prevent us from collecting interest and principal on that loan. If we have sold the loan or the servicing of the loan, failure to properlyascertain the borrower's ability to repay the loan may violate the representations and warranties we made in such a sale and impose upon us an obligation torepurchase the loan.If real estate Rialto acquires through foreclosures is not properly valued when it is acquired, we could be required to take valuation charge-offs, whichwould reduce our earnings.When a loan is foreclosed upon and we take title to the property, we obtain a valuation of the property and base its book value on that valuation.The book value of the foreclosed property is periodically compared to its updated market value (or its updated market value less estimated selling costs if theforeclosed property is classified as held-for-sale), and a charge-off is recorded for any excess of the property's book value over its fair value. If the revisedvaluation we establish for a property proves to be too high, we may have to record additional charge-offs in subsequent periods. Material charge-offs couldhave an adverse effect on our results of operations, and possibly even on our financial condition.Regulatory RisksWe may be adversely impacted by legal and regulatory changes.We are subject with regard to almost all of our activities to a variety of federal, state and local laws and regulations. Laws and regulations, andpolicies under or interpretations of existing laws and regulations, change frequently. Our businesses could be adversely affected by changes in laws,regulations, policies or interpretations or by our inability to comply with them without making significant changes in our businesses.13Table of ContentsWe may be adversely impacted by laws and regulations directed at the financial industry.New or modified regulations and related regulatory guidance focused on the financial industry may have adverse effects on aspects of ourbusinesses. For example, in October 2014, final rules were promulgated under the Dodd-Frank Wall Street Reform Act that require mortgage lenders or third-party B-piece buyers to retain a portion of the credit risk related to securitized loans. We have determined that these rules do not affect our residentialmortgage lending operations at this time; however, the new rules may adversely impact our RMF subsidiary's commercial mortgage lending operations.While it is still too early to know the full impact of the new rules on the market, we believe that the rules may reduce the price of commercial mortgage-backed securities ("CMBS") and limit the overall volume of CMBS related loan purchases, which could impact the financial results of our RMF business. Inaddition, if our residential mortgage lending operations became subject to these rules in the future, that would substantially increase the amount we wouldhave to invest in our mortgage lending operations and increase our risks with regard to loans we originate and sell in the secondary mortgage market.Governmental regulations regarding land use and environmental matters could increase the cost and limit the availability of our development andhomebuilding projects and adversely affect our business or financial results.We are subject to extensive and complex laws and regulations that affect the land development, homebuilding and apartment development process,including laws and regulations related to zoning, permitted land uses, levels of density, building design, elevation of properties, water and waste disposal anduse of open spaces. These regulations often provide broad discretion to the administering governmental authorities as to the conditions we must meet prior todevelopment or construction being approved, if they are approved at all. We are also subject to determinations by governmental authorities as to theadequacy of water or sewage facilities, roads and other local services with regard to particular residential communities. New housing developments may alsobe subject to various assessments for schools, parks, streets and other public improvements. In addition, in many markets government authorities haveimplemented no growth or growth control initiatives. Any of these can limit, delay, or increase the costs of land development or home construction.We are also subject to a variety of local, state and federal laws and regulations concerning protection of the environment. In some of the marketswhere we operate, we are required by law to pay environmental impact fees, use energy-saving construction materials and give commitments tomunicipalities to provide infrastructure such as roads and sewage systems. We generally are required to obtain permits, entitlements and approvals from localauthorities to commence and carry out residential development or home construction. These permits, entitlements and approvals may, from time-to-time, beopposed or challenged by local governments, environmental advocacy groups, neighboring property owners or other possibly interested parties, addingdelays, costs and risks of non-approval to the process. Violations of environmental laws and regulations can result in injunctions, civil penalties, remediationexpenses, and other costs. In addition, some environmental laws impose strict liability, which means that we may be held liable for unlawful environmentalconditions on property we own which we did not create.We are also subject to laws and regulations related to workers' health and safety, and there are efforts to subject us to other labor related laws or rules,some of which may make us responsible for things done by our subcontractors over which we have little or no control. In addition, our residential mortgagesubsidiary is subject to various state and federal statutes, rules and regulations, including those that relate to lending operations and other areas of mortgageorigination and loan servicing. The impact of those statutes, rules and regulations can increase our homebuyers’ costs of financing, and our cost of doingbusiness, as well as restricting our homebuyers’ access to some types of loans.Our obligation to comply with the laws and regulations under which we operate, and our need to ensure that our associates, subcontractors and otheragents comply with these laws and regulations, could result in delays in construction and land development, cause us to incur substantial costs and prohibitor restrict land development and homebuilding activity in certain areas in which we operate. Budget reductions by state and local governmental agenciesmay increase the time it takes to obtain required approvals and therefore may aggravate the delays we could encounter. Government agencies also routinelyinitiate audits, reviews or investigations of our business practices to ensure compliance with applicable laws and regulations, which can cause us to incurcosts or create other disruptions in our businesses that can be significant.We can be injured by improper acts of persons over whom we do not have control.Although we expect all of our associates (i.e., employees), officers and directors to comply at all times with all applicable laws, rules and regulations,there may be instances in which subcontractors or others through whom we do business engage in practices that do not comply with applicable laws,regulations or governmental guidelines. When we learn of practices that do not comply with applicable laws or regulations, including practices relating tohomes, buildings or multifamily rental properties we build or finance, we move actively to stop the non-complying practices as soon as possible and we havetaken disciplinary action with regard to associates of ours who were aware of non-complying practices and did not take steps to address them, including insome instances terminating their employment. However, regardless of the steps we take after we learn of practices that do not comply with applicable laws orregulations, we can in some instances be subject to fines or other governmental penalties, and our reputation can be injured, due to the practices' havingtaken place.14Table of ContentsWe could be hurt by efforts to impose liabilities or obligations on persons with regard to labor law violations by other persons whose employees performcontracted services.The homes we sell are built by employees of subcontractors and other contract parties. We do not have the ability to control what these contractparties pay their employees or the work rules they impose on their employees. However, various governmental agencies are trying to hold contract partieslike us responsible for violations of wage and hour laws and other work related laws by firms whose employees are performing contracted for services. Arecent National Labor Relations Board ruling holds that for labor law purposes a firm could under some circumstances be responsible as a joint employer ofits contractors' employees. If that ruling is upheld on appeal, it could make us responsible for collective bargaining obligations and labor law violations byour subcontractors. Governmental rulings that make us responsible for labor practices by our subcontractors could create substantial exposures for us insituations that are not within our control.Our ability to collect upon mortgage loans may be limited by the application of state laws.Our mortgage loans typically permit us to accelerate the debt upon default by the borrower. The courts of all states will enforce acceleration clausesin the event of a material payment default, subject in some cases to a right of the court to revoke the acceleration and reinstate the mortgage loan if a paymentdefault is cured. The equity courts of a state, however, may refuse to allow the foreclosure of a mortgage or to permit the acceleration of the indebtedness ininstances in which they decide that the exercise of those remedies would be inequitable or unjust or the circumstances would render an accelerationunconscionable.Further, the ability to collect upon mortgage loans may be limited by the application of state and federal laws. For example, Nevada has enacted alaw providing that if the amount an assignee of a mortgage note paid to acquire the note is less than the face amount of the note, the assignee cannot recovermore through a deficiency action than the amount it paid for the note. If the Nevada law is upheld, or similar laws are enacted in other jurisdictions, it couldmaterially and adversely affect our ability and the ability of funds we manage to profit from purchases of distressed debt.Other RisksOur results of operations could be adversely affected if legal claims against us are not resolved in our favor.In the ordinary course of our business, we are subject to legal claims by homebuyers, borrowers against whom we have instituted foreclosureproceedings, persons with whom we have land purchase contracts and a variety of other persons. We establish reserves against legal claims and we believethat, in general, legal claims will not have a material adverse effect on our business or financial condition. However, if the amounts we are required to pay as aresult of claims against us substantially exceed the sums anticipated by our reserves, the need to pay those amounts could have a material adverse effect onour results of operations for the periods when we are required to make the payments. We have a substantial judgment against us in a contract suit, which wehave bonded and are appealing as disclosed in Item 3. Legal Proceedings.Information technology failures and data security breaches could harm our business.We rely extensively on information technology ("IT") systems, including Internet sites, data hosting facilities and other hardware and softwareplatforms, some of which are hosted by third parties, to assist in conducting our businesses. Our IT systems, like those of most companies, may be vulnerableto a variety of interruptions, including, but not limited to, natural disasters, telecommunications failures, hackers, and other security issues. Moreover, ourcomputer systems, like those of most companies, are subjected to computer viruses or other malicious codes, and to cyber or phishing-attacks. Although wehave implemented administrative and technical controls and taken other actions to minimize the risk of cyber incidents and protect our informationtechnology, computer intrusion efforts are becoming increasingly sophisticated, and even the enhanced controls we have installed might be breached. If ourIT systems cease to function properly, we could suffer interruptions in our operations. If our cyber-security is breached, unauthorized persons may gain accessto proprietary or confidential information, including information about purchasers of our homes or borrowers from our mortgage lending subsidiaries. Thiscould damage our reputation, expose us to claims, and require us to incur significant costs to repair or restore the security of our computer systems.15Table of ContentsIncreases in the rate of cancellations of home sale agreements could have an adverse effect on our business.Our backlog reflects agreements of sale with our homebuyers for homes that have not yet been delivered. We have received a deposit from our homebuyer for each home reflected in our backlog, and generally we have the right to retain the deposit if the homebuyer does not complete the purchase. In somecases, however, a homebuyer may cancel the agreement of sale and receive a complete or partial refund of the deposit for reasons such as state and local laws,the homebuyer’s inability to obtain mortgage financing, his or her inability to sell his or her current home or our inability to complete and deliver the homewithin the specified time. If there is a downturn in the housing market, or if mortgage financing becomes even less available than it currently is, morehomebuyers may cancel their agreements of sale with us, which would have an adverse effect on our business and results of operations.Our success depends on our ability to acquire land suitable for residential homebuilding at reasonable prices, in accordance with our land investmentcriteria.There is strong competition among homebuilders for land that is suitable for residential development. The future availability of finished andpartially finished developed lots and undeveloped land that meet our internal criteria depends on a number of factors outside our control, including landavailability in general, competition with other homebuilders and land buyers for desirable property, inflation in land prices, zoning, allowable housingdensity, and other regulatory requirements. Should suitable lots or land become less available, the number of homes we could build and sell could bereduced, and the cost of land could be increased, perhaps substantially, which could adversely impact our results of operations.Expansion of our services and investments into international markets through our Rialto segment subjects us to risks inherent in international operations.Fund II, of which our Rialto segment owns an interest and for which it performs asset management services, owns an interest in a joint venture whichholds real estate assets in Spain. Expansion of our services and investments in Spain and any expansion into other international markets in the future, couldresult in operational problems not typically experienced in the United States. Our activities outside the United States are subject to risks associated withdoing business internationally, including fluctuations in currency exchange rates, the implementation of currency controls, material changes in a specificcountry’s or region’s political or economic conditions, differences in the legal and regulatory systems, reputational risks and cultural differences which maylead to competitive disadvantages, particularly due to our need to comply with U.S. anti-corruption laws. There also are tax consequences of doing businessoutside the U.S., both under U.S. tax laws and under the tax laws of the countries in which we do business.We could suffer adverse tax and other financial consequences if we are unable to utilize our net operating loss ("NOL") carryforwards.At November 30, 2016, we had state tax net operating loss ("NOL") carryforwards totaling $90.6 million that will expire between 2017 and 2035. AtNovember 30, 2016, we had a valuation allowance of $5.8 million, primarily related to state NOL carryforwards that are not more likely than not to beutilized due to an inability to carry back these losses in most states and short carryforward periods that exist in certain states. If we are unable to use ourNOLs, we may have to record charges or reduce our deferred tax assets, which could have an adverse effect on our results of operations.The new Trump Administration may make substantial changes to fiscal and tax policies that may adversely affect our business.The Trump Administration has called for substantial change to fiscal and tax policies, which may include comprehensive tax reform. We cannotpredict the impact, if any, of these changes to our business. However, it is possible that these changes could adversely affect our business. It is likely thatsome policies adopted by the new administration will benefit us and others will negatively affect us. Until we know what changes are enacted, we will notknow whether in total we benefit from, or are negatively affected by, the changes.We experience variability in our operating results on a quarterly basis and, as a result, our historical performance may not be a meaningful indicator offuture results.We historically have experienced, and expect to continue to experience, variability in quarterly results. As a result of such variability, our short-termperformance may not be a meaningful indicator of future results. Our homebuilding business is seasonal in nature and generally reflects higher levels of newhome order activity in our second fiscal quarter and increased deliveries in the second half of our fiscal year. Our quarterly results of operations may continueto fluctuate in the future as a result of a variety of factors, including, among others, seasonal home buying patterns, the timing of home closings and landsales and weather-related problems.16Table of ContentsWe have a stockholder who can exercise significant influence over matters that are brought to a vote of our stockholders.Stuart Miller, our Chief Executive Officer and a Director, has voting control, through personal holdings and holdings by family-owned entities, ofClass B, and to a lesser extent Class A, common stock that enables Mr. Miller to cast approximately 42% of the votes that can be cast by the holders of all ouroutstanding Class A and Class B common stock combined. That effectively gives Mr. Miller the power to control the election of our directors and theapproval of matters that are presented to our stockholders. Mr. Miller's voting power might discourage someone from seeking to acquire us or from making asignificant equity investment in us, even if we needed the investment to meet our obligations or to operate our business. Also, because of his voting power,Mr. Miller could be able to cause our stockholders to approve actions that are contrary to our other stockholders' desires.The trading price of our Class B common stock normally is lower than that of our Class A common stock.The only difference between our Class A common stock and our Class B common stock is that the Class B common stock entitles the holders to tenvotes per share, while the Class A common stock entitles holders to only one vote per share. However, the trading price of the Class B common stock on theNew York Stock Exchange ("NYSE") normally is substantially lower than the NYSE trading price of our Class A common stock. We believe this is becauseonly a relatively small number of shares of Class B common stock are available for trading, which reduces the liquidity of the market for our Class B commonstock to a point where many investors are reluctant to invest in it. The limited liquidity could make it difficult for a holder of even a relatively small numberof shares of our Class B common stock to dispose of the stock without materially reducing the trading price of the Class B common stock.Changes in global or regional environmental conditions and governmental actions in response to such changes may adversely affect us by increasing thecosts of or restricting our planned or future growth activities.There is growing concern from many members of the scientific community and the general public that an increase in global average temperaturesdue to emissions of greenhouse gases and other human activities have caused, or will cause, significant changes in weather patterns and increase thefrequency and severity of natural disasters. Government mandates, standards or regulations intended to reduce greenhouse gas emissions or projected climatechange impacts have resulted, and are likely to continue to result, in restrictions on land development in certain areas and increased energy, transportationand raw material costs, or cause us to incur compliance expenses that we will be unable fully to recover, which could reduce our housing gross profit marginsand adversely affect our results of operations.Item 1B.Unresolved Staff Comments.Not applicable.Executive Officers of Lennar CorporationThe following individuals are our executive officers as of January 20, 2017:NamePositionAgeStuart MillerChief Executive Officer59Richard BeckwittPresident57Jonathan M. JaffeVice President and Chief Operating Officer57Bruce GrossVice President and Chief Financial Officer58Diane J. BessetteVice President and Treasurer56Mark SustanaSecretary and General Counsel55David M. CollinsController47Mr. Miller is one of our Directors and has served as our Chief Executive Officer since 1997. Mr. Miller served as our President from 1997 to April2011. Before 1997, Mr. Miller held various executive positions with us. Mr. Miller also serves on the Board of Directors of Five Point Holdings, LLC.Mr. Beckwitt served as our Executive Vice President from March 2006 to 2011. Since April 2011, Mr. Beckwitt has served as our President. Mr.Beckwitt also serves on the Board of Directors of Eagle Materials Inc. and Five Point Holdings, LLC, and previously served on the Board of Directors of D.R.Horton, Inc. from 1993 to November 2003. From 1993 to March 2000, he held various executive officer positions at D.R. Horton, including President of thecompany.Mr. Jaffe has served as Vice President since 1994 and has served as our Chief Operating Officer since December 2004. Before that time, Mr. Jaffeserved as a Regional President in our Homebuilding operations. Additionally, prior to his appointment as Chief Operating Officer, Mr. Jaffe was one of ourDirectors from 1997 through June 2004. Mr. Jaffe serves on the Board of Directors of Five Point Holdings, LLC.17Table of ContentsMr. Gross has served as Vice President and our Chief Financial Officer since 1997. Before that, Mr. Gross was Senior Vice President, Controller andTreasurer of Pacific Greystone Corporation, which we acquired in 1997.Ms. Bessette joined us in 1995 and served as our Controller from 1997 to 2008. Since February 2008, she has served as our Treasurer. She wasappointed a Vice President in 2000.Mr. Sustana has served as our Secretary and General Counsel since 2005.Mr. Collins joined us in 1998 and has served as our Controller since February 2008.Item 2.Properties.We lease and maintain our executive offices in an office complex in Miami, Florida. Our homebuilding, financial services, Rialto and multifamilyoffices are located in the markets where we conduct business, primarily in leased space. We believe that our existing facilities are adequate for our current andplanned levels of operation.Because of the nature of our homebuilding operations, significant amounts of property are held as inventory in the ordinary course of ourhomebuilding business. We discuss these properties in the discussion of our homebuilding operations in Item 1 of this Report.Item 3.Legal Proceedings.We are party to various claims and lawsuits which arise in the ordinary course of business, but we do not consider the volume of our claims andlawsuits unusual given the number of homes we deliver and the fact that the lawsuits often relate to homes delivered several years before the lawsuits arecommenced. Although the specific allegations in the lawsuits differ, they most commonly involve claims that we failed to construct homes in particularcommunities in accordance with plans and specifications or applicable construction codes and seek reimbursement for sums allegedly needed to remedy thealleged deficiencies, assert contract issues or relate to personal injuries. Lawsuits of these types are common within the homebuilding industry. We are aplaintiff in many cases in which we seek contribution from our subcontractors for home repair costs. The costs incurred by us in construction defect lawsuitsmay be offset by warranty reserves, our third-party insurers, subcontractor insurers and indemnity contributions from subcontractors. We are also a party tovarious lawsuits involving purchases and sales of real property. These lawsuits include claims regarding representations and warranties made in connectionwith the transfer of the property and disputes regarding the obligation to purchase or sell the property. From time-to-time, we also receive notices fromenvironmental agencies or other regulators regarding alleged violations of environmental or other laws. We typically settle these matters before they reachlitigation for amounts that are not material to us.We have been engaged in litigation since 2008 in the United States District Court for the District of Maryland (U.S. Home Corporation v. SettlersCrossing, LLC, et al., Civil Action No. DKC 08-1863) regarding whether we are required by a contract we entered into in 2005 to purchase a property inMaryland. After entering into the contract, we later renegotiated the purchase price, reducing it from $200 million to $134 million, $20 million of which hasbeen paid and subsequently written off, leaving a balance of $114 million. In January 2015, the District Court rendered a decision ordering us to purchase theproperty for the $114 million balance of the contract price, to pay interest at the rate of 12% per annum from May 27, 2008, and to reimburse the seller forreal estate taxes and attorneys’ fees. We believe the decision is contrary to applicable law and have appealed the decision. We do not believe it is probablethat a loss has occurred and, therefore, no liability has been recorded with respect to this case.On June 29, 2015, the court ruled that interest will be calculated as simple interest at the rate of 12% per annum from May 27, 2008 until the date wepurchase the property. Simple interest on $114 million at 12% per annum will accrue at the rate of $13.7 million per year, totaling approximately $116million as of November 30, 2016. In addition, if we are required to purchase the property, we will be obligated to reimburse the seller for real estate taxes,which currently total $1.6 million. We have not engaged in discovery regarding the amount of the plaintiffs’ attorneys’ fees. If the District Court decision istotally reversed on appeal, we will not have to purchase the property or pay interest, real estate taxes or attorneys’ fees.In its June 29, 2015 ruling, the District Court determined that we would be permitted to stay the judgment during appeal by posting a bond in theamount of $223.4 million related to pending litigation. The District Court calculated this amount by adding 12% per annum simple interest to the $114million purchase price for the period beginning May 27, 2008 through May 26, 2016, the date the District Court estimated the appeal of the case would beconcluded.In June 2016, we received Notices of Violation from the United States Environmental Protection Agency related to stormwater compliance at certainof our Tampa and Southwest Florida communities. It has been determined that violations occurred and this matter will result in monetary sanctions to us,which we do not currently expect will be material.We do not believe that the ultimate resolution of these claims or lawsuits will have a material adverse effect on our business or financial position.However, the financial effect of litigation concerning purchases and sales of property may18Table of Contentsdepend upon the value of the subject property, which may have changed from the time the agreement for purchase or sale was entered into.Item 4.Mine Safety Disclosures.Not applicable.PART IIItem 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.Our Class A and Class B common stock are listed on the New York Stock Exchange under the symbols "LEN" and "LEN.B," respectively. Thefollowing table shows the high and low sales prices for our Class A and Class B common stock for the periods indicated, as reported by the New York StockExchange, and cash dividends declared per share: Class A Common StockHigh/Low Prices Cash DividendsPer Class A ShareFiscal Quarter2016 2015 2016 2015First$52.49 - 37.14 $51.51 - 41.25 4¢ 4¢Second$48.96 - 42.37 $53.67 - 44.76 4¢ 4¢Third$49.60 - 43.11 $56.04 - 45.78 4¢ 4¢Fourth$47.60 - 39.68 $54.23 - 46.23 4¢ 4¢ Class B Common StockHigh/Low Prices Cash DividendsPer Class B ShareFiscal Quarter2016 2015 2016 2015First$42.70 - 30.04 $41.21 - 32.75 4¢ 4¢Second$39.30 - 33.71 $42.59 - 36.14 4¢ 4¢Third$39.93 - 34.68 $46.55 - 37.61 4¢ 4¢Fourth$38.17 - 32.09 $45.69 - 38.23 4¢ 4¢As of December 31, 2016, the last reported sale price of our Class A common stock was $42.93 and the last reported sale price of our Class Bcommon stock was $34.50. As of December 31, 2016, there were approximately 706 and 508 holders of record of our Class A and Class B common stock,respectively.On January 12, 2017, our Board of Directors declared a quarterly cash dividend of $0.04 per share for both our Class A and Class B common stock,which is payable on February 10, 2017, to holders of record at the close of business on January 27, 2017. Our Board of Directors evaluates each quarter thedecision whether to declare a dividend and the amount of the dividend.The following table provides information about our repurchases of common stock during the three months ended November 30, 2016:Period:Total Number of SharesPurchased (1) Average Price Paid PerShare Total Number of SharesPurchased as Part ofPublicly Announced Plans orPrograms (2) Maximum Number of Sharesthat may yet be Purchasedunder the Plans or Programs(2)September 1 to September 30, 2016228 $43.20 — 6,218,968October 1 to October 31, 2016320 $42.13 — 6,218,968November 1 to November 30, 2016177 $41.40 — 6,218,968(1)Represents shares of Class A common stock withheld by us to cover withholding taxes due, at the election of certain holders of nonvested shares, with market valueapproximating the amount of withholding taxes due.(2)In June 2001, our Board of Directors authorized a stock repurchase program under which we were authorized to purchase up to 20 million shares of our outstanding Class Acommon stock or Class B common stock. This repurchase authorization has no expiration date.The information required by Item 201(d) of Regulation S-K is provided in Item 12 of this Report.19Table of ContentsPerformance GraphThe following graph compares the five-year cumulative total return of our Class A common stock with the Dow Jones U.S. Home Construction Indexand the Dow Jones U.S. Total Market Index. The graph assumes $100 invested on November 30, 2011 in our Class A common stock, the Dow Jones U.S.Home Construction Index and the Dow Jones U.S. Total Market Index, and the reinvestment of all dividends. 2011 2012 2013 2014 2015 2016Lennar Corporation$100 208 197 261 284 237Dow Jones U.S. Home Construction Index$100 182 189 226 256 225Dow Jones U.S. Total Market Index$100 116 152 176 180 19420Table of ContentsItem 6.Selected Financial Data.The following table sets forth our selected consolidated financial and operating information as of or for each of the years ended November 30, 2012through 2016. The information presented below is based upon our historical financial statements. At or for the Years Ended November 30,(Dollars in thousands, except per share amounts)2016 2015 2014 2013 2012Results of Operations: Revenues: Lennar Homebuilding$9,741,337 8,466,945 7,025,130 5,354,947 3,581,232Lennar Financial Services$687,255 620,527 454,381 427,342 384,618Rialto$233,966 221,923 230,521 138,060 138,856Lennar Multifamily$287,441 164,613 69,780 14,746 426Total revenues$10,949,999 9,474,008 7,779,812 5,935,095 4,105,132Operating earnings (loss): Lennar Homebuilding$1,344,932 1,271,641 1,033,721 733,075 258,985Lennar Financial Services$163,617 127,795 80,138 85,786 84,782Rialto$(16,692) 33,595 44,079 26,128 11,569Lennar Multifamily$71,174 (7,171) (10,993) (16,988) (5,884)Corporate general and administrative expenses$232,562 216,244 177,161 146,060 127,338Earnings before income taxes$1,330,469 1,209,616 969,784 681,941 222,114Net earnings attributable to Lennar (1)$911,844 802,894 638,916 479,674 679,124Diluted earnings per share$3.93 3.46 2.80 2.15 3.11Cash dividends declared per each - Class A andClass B common stock$0.16 0.16 0.16 0.16 0.16Financial Position: Total assets$15,361,781 14,419,509 12,923,151 11,239,885 10,323,177Debt: Lennar Homebuilding$4,575,977 5,025,130 4,661,266 4,165,792 3,971,348Rialto$622,335 771,728 617,077 437,161 569,154Lennar Financial Services$1,077,228 858,300 704,143 374,166 457,994Lennar Multifamily$— — — 13,858 —Stockholders’ equity$7,026,042 5,648,944 4,827,020 4,168,901 3,414,764Total equity$7,211,567 5,950,072 5,251,302 4,627,470 4,001,208Shares outstanding (000s)234,475 211,146 205,039 204,412 191,548Stockholders’ equity per share$29.96 26.75 23.54 20.39 17.83Lennar Homebuilding Data (including unconsolidatedentities): Number of homes delivered26,563 24,292 21,003 18,290 13,802New orders27,372 25,106 22,029 19,043 15,684Backlog of home sales contracts7,623 6,646 5,832 4,806 4,053Backlog dollar value$2,891,538 2,477,751 1,974,328 1,619,601 1,160,385(1)Net earnings attributable to Lennar for the year ended November 30, 2013 included $177.0 million net tax provision, which included a tax benefit of $67.1 million for avaluation allowance reversal. Net earnings attributable to Lennar for the year ended November 30, 2012 included $435.2 million of benefit for income taxes, which included areversal of the majority of our deferred tax asset valuation allowance of $491.5 million, partially offset by a tax provision for fiscal year 2012 pre-tax earnings.21Table of ContentsItem 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.The following discussion and analysis of our financial condition and results of operations should be read in conjunction with "Selected FinancialData" and our audited consolidated financial statements and accompanying notes included elsewhere in this Report.Special Note Regarding Forward-Looking StatementsThis annual report on Form 10-K contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.Forward-looking statements contained herein may include opinions formed based upon general observations, anecdotal evidence and industry experience,but that are not supported by specific investigation or analysis. These statements concern expectations, beliefs, projections, plans and strategies, anticipatedevents or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements in this annual report includestatements regarding: our belief that the housing market is continuing its slow and steady recovery, and the drivers behind such recovery; our expectationthat demand will continue to build and come to the market over the next few years and that it should drive increased production; our expectation that we willsee lower margins in 2017 compared to 2016; our expectation that we plan to continue to identify and invest in land opportunities that we expect will driveour future growth and profitability; our belief that our main driver of earnings will continue to be our Homebuilding and Lennar Financial Servicesoperations; our belief that we are currently positioned to deliver between 28,500 and 29,000 homes in fiscal 2017; our expectation regarding the LennarMultifamily segment’s development pipeline, and plans regarding the Multifamily Venture; our expectation regarding variability in our quarterly results; ourexpectations regarding the renewal or replacement of our warehouse facilities; our belief regarding draws upon our bonds or letters of credit, and our beliefregarding the impact to the Company if there were such a draw; our expectation that substantially all homes currently in backlog will be delivered in fiscalyear 2017; our belief that our operations and borrowing resources will provide for our current and long-term capital requirements at our anticipated levels ofactivity; our belief regarding legal proceedings in which we are involved, and, in particular, our belief that the Court’s decision in the Settlers Crossing caseis contrary to applicable law; our expectations regarding the WCI Communities, Inc. ("WCI") transaction, including our expectation that a meeting of theWCI stockholders to vote on the transaction will be held in February 2017, and, if the transaction is approved by the WCI stockholders, will close promptlyafter the stockholders vote; and our estimates regarding certain tax and accounting matters, including our expectations regarding the result of anticipatedsettlements with various taxing authorities and our expectations regarding the energy efficient home and solar energy property tax credits.These forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and assumptions. We wish tocaution readers that certain important factors may have affected and could in the future affect our actual results and could cause actual results to differsignificantly from those expressed in any forward-looking statement. The most important factors that could prevent us from achieving our goals, and causethe assumptions underlying forward-looking statements and the actual results to differ materially from those expressed in or implied by those forward-looking statements include, but are not limited to, the following: our ability to acquire land and pursue real estate opportunities at anticipated prices;increases in operating costs, including costs related to real estate taxes, construction materials, labor and insurance, and our ability to manage our coststructure, both in our Homebuilding and Lennar Multifamily businesses; unfavorable outcomes in legal proceedings that substantially exceed ourexpectations, including an unfavorable outcome in the Settlers Crossing case; with respect to the WCI transaction, that WCI terminates the MergerAgreement to accept what its Board deems to be a superior proposal or that the WCI transaction is not approved by WCI’s stockholders; a slowdown in therecovery of real estate markets across the nation, or any downturn in such markets; changes in general economic and financial conditions, and demographictrends, in the U.S. leading to decreased demand for our services and homes, lower profit margins and reduced access to credit; the possibility that we willincur nonrecurring costs that may not have a material adverse effect on our business or financial condition, but may have a material adverse effect on ourcondensed consolidated financial statements for a particular reporting period; decreased demand for our Lennar Multifamily rental properties, and our abilityto successfully sell our rental properties; the ability of our Lennar Financial Services segment to maintain or increase its capture rate and benefit from Lennarhome deliveries; our ability to successfully execute our strategies, including strategies related to our soft-pivot and reinvigorating technologies in ourbusiness; increased competition for home sales from other sellers of new and resale homes; conditions in the capital, credit and financial markets, includingmortgage lending standards, the availability of mortgage financing and mortgage foreclosure rates; changes in interest and unemployment rates, andinflation; a decline in the value of the land and home inventories we maintain or possible future write-downs of the carrying value of our real estate assets;our ability to successfully develop multifamily assets in the Multifamily Venture; our inability to maintain anticipated pricing levels and our inability topredict the effect of interest rates on demand; the ability and willingness of the participants in various joint ventures to honor their commitments; our abilityto successfully and timely obtain land-use entitlements and construction financing, and address issues that arise in connection with the use and developmentof our land; natural disasters and other unforeseen damage for which our insurance may not provide adequate coverage; our inability to successfully grow ourancillary businesses; the inability of Rialto to sell mortgages it originates into securitizations on favorable terms; potential liability under environmental22Table of Contentsor construction laws, or other laws or regulations affecting our business; regulatory changes that adversely affect the profitability of our businesses; ourability to comply with the terms of our debt instruments, our ability to refinance our debt on terms that are acceptable to us; and our ability to successfullyestimate the impact of certain regulatory, accounting and tax matters, including whether we will continue to benefit from the energy efficient home and solarenergy property tax credits.Please see "Item 1A-Risk Factors" of this Annual Report for a further discussion of these and other risks and uncertainties which could affect ourfuture results. We undertake no obligation to revise any forward-looking statements to reflect events or circumstances after the date of those statements or toreflect the occurrence of anticipated or unanticipated events, except to the extent we are legally required to disclose certain matters in SEC filings orotherwise.OutlookAs we look ahead to 2017, we expect to see a similar economic environment as in 2016 with some potential upside from the new administration inWashington. These expectations derive from the following general views. Even with the now clear upward movement in interest rates mapped out by theFederal Reserve and the many questions around taxes and the regulatory environment raised by our incoming new President, we expect to see a continuedslow but steady, though sometimes erratic, positive homebuilding market. Lower unemployment, modest wage growth and consumer confidence shouldincrease household formation, which drives families to purchase homes and to rent apartments. We believe the new home market continues to havesignificant pent-up demand, though stronger in some markets than in others, and we expect that demand will continue to drive increased production as thedeficit in the housing stock ultimately needs to be replenished. We expect the first time homebuyer will continue to come back to the market as strongereconomic conditions should drive purchasers to the market, with this demand being partially offset by marginally higher monthly payments. Nevertheless,land and labor shortages will continue to be limiting factors and will constrain supply and restrict the ability to quickly respond to growing demand, whilethe mortgage market and higher rents will continue to limit that demand due to potential homebuyers having less disposable income and limited ability tofinance a new home purchase. We expect that these conditions will continue to result in slow but steady, though sometimes erratic growth throughout theindustry.Fiscal 2016 was another excellent year for Lennar, with revenues and net earnings attributable to Lennar increasing 16% and 14%, respectively,from 2015. Our core homebuilding business continued to produce strong operating results as gross margins and operating margins were 23.0% and 13.6%,respectively. Our home deliveries and new orders both increased 9% compared to fiscal 2015. Our efficient Everything’s Included® manufacturing modelhelped mitigate the impact of a tight labor market and our focus on digital marketing and higher volume helped to improve our S,G&A leverage. In addition,we ended the year with a strong sales backlog, up 15% in homes and 17% in dollar value, which gives us a strong start for fiscal 2017.Complementing our homebuilding business, we also had strong performances from our other businesses during fiscal 2016. Our Financial Servicessegment produced $163.6 million of pretax earnings compared to $127.8 million in 2015. The increase in profitability was primarily due to increasedtransactions and higher profit per transaction in the segment's mortgage and title operations.Our Multifamily rental business continued to grow during fiscal 2016, as it sold seven completed rental properties.In fiscal 2017, our principal focus in our homebuilding operations will continue to be 1) on our soft-pivot strategy, we plan to continue to identifyand invest in unique and enticing land opportunities with shorter term land that we expect will drive our future growth and profitability; 2) lower targetedgrowth rate to maximize our net operating margin though we expect to continue to see lower margins in 2017 compared to 2016 due to cost increasesoutpacing sales price increases and competitive pressures; and 3) heavy focus on SG&A by using innovative strategies to reduce customer acquisition costs.We expect that our Company’s main driver of earnings will continue to be our homebuilding and financial services operations as we believe we arecurrently positioned to deliver between 28,500 and 29,000 homes in fiscal 2017. We are also focused on our multiple platforms including Rialto andMultifamily, as such ancillary businesses continue to mature and expand their franchises providing opportunities that we expect will enhance shareholdervalue. Overall, we believe we are on track to achieve another year of substantial profitability in fiscal 2017.23Table of ContentsResults of OperationsOverviewOur net earnings attributable to Lennar were $911.8 million, or $3.93 per diluted share ($4.13 per basic share) in 2016, $802.9 million, or $3.46 perdiluted share ($3.87 per basic share) in 2015, and $638.9 million, or $2.80 per diluted share ($3.12 per basic share) in 2014.The following table sets forth financial and operational information for the years indicated related to our operations. Years Ended November 30,(Dollars in thousands)2016 2015 2014Lennar Homebuilding revenues: Sales of homes$9,558,517 8,335,904 6,839,642Sales of land182,820 131,041 185,488Total Lennar Homebuilding revenues9,741,337 8,466,945 7,025,130Lennar Homebuilding costs and expenses: Costs of homes sold7,362,853 6,332,850 5,103,409Costs of land sold138,111 100,939 143,797Selling, general and administrative898,917 831,050 714,823Total Lennar Homebuilding costs and expenses8,399,881 7,264,839 5,962,029Lennar Homebuilding operating margins1,341,456 1,202,106 1,063,101Lennar Homebuilding equity in earnings (loss) from unconsolidated entities(49,275) 63,373 (355)Lennar Homebuilding other income, net57,377 18,616 7,526Other interest expense(4,626) (12,454) (36,551)Lennar Homebuilding operating earnings$1,344,932 1,271,641 1,033,721Lennar Financial Services revenues$687,255 620,527 454,381Lennar Financial Services costs and expenses523,638 492,732 374,243Lennar Financial Services operating earnings$163,617 127,795 80,138Rialto revenues$233,966 221,923 230,521Rialto costs and expenses229,769 222,875 249,114Rialto equity in earnings from unconsolidated entities18,961 22,293 59,277Rialto other income (expense), net(39,850) 12,254 3,395Rialto operating earnings (loss)$(16,692) 33,595 44,079Lennar Multifamily revenues287,441 164,613 69,780Lennar Multifamily costs and expenses301,786 191,302 95,227Lennar Multifamily equity in earnings from unconsolidated entities85,519 19,518 14,454Lennar Multifamily operating earnings (loss)$71,174 (7,171) (10,993)Total operating earnings$1,563,031 1,425,860 1,146,945Corporate general and administrative expenses232,562 216,244 177,161Earnings before income taxes$1,330,469 1,209,616 969,784Net earnings attributable to Lennar$911,844 802,894 638,916Gross margin as a % of revenue from home sales23.0% 24.0% 25.4%S,G&A expenses as a % of revenues from home sales9.4% 10.0% 10.5%Operating margin as a % of revenues from home sales13.6% 14.1% 14.9%Average sales price$361,000 344,000 326,00024Table of Contents2016 versus 2015Revenues from home sales increased 15% in the year ended November 30, 2016 to $9.6 billion from $8.3 billion in 2015. Revenues were higherprimarily due to a 9% increase in the number of home deliveries, excluding unconsolidated entities, and a 5% increase in the average sales price of homesdelivered. New home deliveries, excluding unconsolidated entities, increased to 26,481 homes in the year ended November 30, 2016 from 24,209 homes lastyear. There was an increase in home deliveries in all of our Homebuilding segments and Homebuilding Other. This includes an increase in home deliveries inHomebuilding Central despite a slight decrease in home deliveries in our former Homebuilding Houston segment, which is now aggregated into ourHomebuilding Central segment as it no longer meets the reportable segment criteria. The increase in the number of deliveries was primarily driven by anincrease in active communities over the last year and by higher demand as the number of deliveries per active community increased. The decrease in homedeliveries in Houston was primarily due to less demand in the higher-priced communities driven by volatility in the energy sector. The average sales price ofhomes delivered increased to $361,000 in the year ended November 30, 2016 from $344,000 in the year ended November 30, 2015, primarily due to productmix (selling at different price points) and increased pricing in certain of our markets due to favorable market conditions. Sales incentives offered tohomebuyers were $22,500 per home delivered in the year ended November 30, 2016, or 5.9% as a percentage of home sales revenue, compared to $21,400per home delivered in the year ended November 30, 2015, or 5.9% as a percentage of home sales revenue.Gross margins on home sales were $2.2 billion, or 23.0%, in the year ended November 30, 2016, compared to $2.0 billion, or 24.0%, in the yearended November 30, 2015. Gross margin percentage on home sales decreased compared to the year ended November 30, 2015 primarily due to an increase inland costs per home, partially offset by an increase in the average sales price of homes delivered.Selling, general and administrative expenses were $898.9 million in the year ended November 30, 2016, compared to $831.1 million in the yearended November 30, 2015. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 9.4% in the year endedNovember 30, 2016, from 10.0% in the year ended November 30, 2015 due to improved operating leverage as a result of an increase in home deliveries andbenefits from our focus on digital marketing.Gross profits on land sales were $44.7 million in the year ended November 30, 2016, compared to $30.1 million in the year ended November 30,2015.Lennar Homebuilding equity in earnings (loss) from unconsolidated entities was ($49.3) million in the year ended November 30, 2016, compared to$63.4 million in the year ended November 30, 2015. In the year ended November 30, 2016, Lennar Homebuilding equity in loss from unconsolidated entitieswas primarily attributable to our share of costs associated with the FivePoint combination and operational net losses from the new FivePoint unconsolidatedentity, totaling $42.6 million. This was partially offset by $12.7 million of equity in earnings from one of our unconsolidated entities primarily due to salesof homesites to third parties. In the year ended November 30, 2015, Lennar Homebuilding equity in earnings from unconsolidated entities included $82.8million of equity in earnings from one of our unconsolidated entities primarily due to sales of homesites and a commercial property to third parties, sales ofhomesites to another joint venture in which we have a 50% investment, and a gain on debt extinguishment.Lennar Homebuilding other income, net, totaled $57.4 million in the year ended November 30, 2016, compared to $18.6 million in the year endedNovember 30, 2015. In the year ended November 30, 2016, other income, net, included management fee income and a profit participation related to LennarHomebuilding's strategic joint ventures and gains on the sale of several clubhouses during the year ended November 30, 2016. In the year endedNovember 30, 2015, other income, net included $10.2 million aggregate gains on sales of an operating property and a clubhouse.Lennar Homebuilding interest expense was $245.1 million in the year ended November 30, 2016 ($235.1 million was included in costs of homessold, $5.3 million in costs of land sold and $4.6 million in other interest expense), compared to $220.1 million in the year ended November 30, 2015 ($205.2million was included in costs of homes sold, $2.5 million in costs of land sold and $12.5 million in other interest expense). Interest expense included in costsof homes sold increased primarily due to an increase in home deliveries.Operating earnings for our Lennar Financial Services segment were $163.6 million in the year ended November 30, 2016, compared to $127.8million in the year ended November 30, 2015. The increase in profitability was primarily due to increased transactions and higher profit per transaction in thesegment's mortgage and title operations.Operating earnings for our Rialto segment were $2.1 million in the year ended November 30, 2016 (which included a $16.7 million operating lossand an add back of $18.8 million of net loss attributable to noncontrolling interests). Operating earnings in the year ended November 30, 2015 were $28.8million (which included $33.6 million of operating earnings, partially offset by $4.8 million of net earnings attributable to noncontrolling interests).25Table of ContentsRialto revenues were $234.0 million in the year ended November 30, 2016, compared to $221.9 million in the year ended November 30, 2015.Revenues increased primarily due to an increase in Rialto Mortgage Finance ("RMF") securitization revenues due to higher securitization margins.Rialto expenses were $229.8 million in the year ended November 30, 2016, compared to $222.9 million in the year ended November 30, 2015.Expenses increased primarily due to an increase in loan impairments and general and administrative expenses.Rialto equity in earnings from unconsolidated entities was $19.0 million and $22.3 million in the years ended November 30, 2016 and 2015,respectively, related to Rialto's share of earnings from its real estate funds (the "Funds").Rialto other income (expense), net, was ($39.9) million in the year ended November 30, 2016, compared to $12.3 million in the year endedNovember 30, 2015. The decrease in other income (expense), net, was primarily attributable to a $16.0 million write-off of uncollectible receivables related toa hospital, which was acquired through the resolution of one of Rialto's loans from a 2010 portfolio, a decrease in net realized gains on the sale of real estateowned ("REO"), and an increase in REO impairments. The hospital is managed by a third party management company.Operating earnings for our Lennar Multifamily segment were $71.2 million in the year ended November 30, 2016, compared to an operating loss of$7.2 million in the year ended November 30, 2015. The increase in profitability was primarily due to the segment's $91.0 million share of gains as a result ofthe sale of seven operating properties by Lennar Multifamily's unconsolidated entities. In the year ended November 30, 2015, the operating loss in LennarMultifamily primarily related to general and administrative expenses, partially offset by the segment's $22.2 million share of gains as a result of the sale oftwo operating properties by Lennar Multifamily's unconsolidated entities, management fee income and general contractor income, net.Corporate general and administrative expenses were $232.6 million, or 2.1% as a percentage of total revenues, in the year ended November 30,2016, compared to $216.2 million, or 2.3% as a percentage of total revenues, in the year ended November 30, 2015. As a percentage of total revenues,corporate general and administrative expenses improved due to increased operating leverage.Net earnings attributable to noncontrolling interests were $1.2 million and $16.3 million in the years ended November 30, 2016 and 2015,respectively. Net earnings attributable to noncontrolling interests during the year ended November 30, 2016 were primarily attributable to earnings related toLennar Homebuilding consolidated joint ventures, partially offset by a net loss related to the FDIC's interest in the portfolio of real estate loans that weacquired in partnership with the FDIC. Net earnings attributable to noncontrolling interests during the year ended November 30, 2015 were primarilyattributable to earnings related to Lennar Homebuilding consolidated joint ventures and net earnings related to the FDIC's interest in the portfolio of realestate loans that we acquired in partnership with the FDIC.In the years ended November 30, 2016 and 2015, we had a tax provision of $417.4 million and $390.4 million, respectively. Our overall effectiveincome tax rates were 31.40% and 32.72% for the years ended November 30, 2016 and 2015, respectively. The reduction is primarily the result of the reversalof an accrual due to a settlement with the IRS in the year ended November 30, 2016, which reduced our effective tax rate by (1.02%). During the year endedNovember 30, 2016, tax legislation was passed extending the new energy efficient home credit through 2016, as well as extending the 30% investment taxcredit for solar energy property through 2022. For the years ended November 30, 2016 and 2015, the impact of these tax credits was (3.46%) and (1.92%),respectively. However, the new energy efficient home credit expired in December 2016 and will not benefit our effective tax rate in 2017 and future yearsunless extending legislation is enacted.2015 versus 2014Revenues from home sales increased 22% in the year ended November 30, 2015 to $8.3 billion from $6.8 billion in 2014. Revenues were higherprimarily due to a 15% increase in the number of home deliveries, excluding unconsolidated entities, and a 6% increase in the average sales price of homesdelivered. New home deliveries, excluding unconsolidated entities, increased to 24,209 homes in the year ended November 30, 2015 from 20,971 homes inthe year ended November 30, 2014. There was an increase in home deliveries in all of our Homebuilding segments and Homebuilding Other. The averagesales price of homes delivered increased to $344,000 in the year ended November 30, 2015 from $326,000 in the year ended November 30, 2014, primarilydue to increased pricing in many of our markets due to favorable market conditions. Sales incentives offered to homebuyers were $21,400 per home deliveredin the year ended November 30, 2015, or 5.9% as a percentage of home sales revenue, compared to $21,400 per home delivered in the year endedNovember 30, 2014, or 6.2% as a percentage of home sales revenue.Gross margins on home sales were $2.0 billion, or 24.0%, in the year ended November 30, 2015, compared to $1.7 billion, or 25.4%, in the yearended November 30, 2014. Gross margin percentage on home sales decreased compared to the year ended November 30, 2014, primarily due to an increase inland costs, partially offset by an increase in the average sales price of homes delivered and a decrease in sales incentives offered to homebuyers as apercentage of revenue from home sales.26Table of ContentsSelling, general and administrative expenses were $831.1 million in the year ended November 30, 2015, compared to $714.8 million in the yearended November 30, 2014. As a percentage of revenues from home sales, selling, general and administrative expenses improved to 10.0% in the year endedNovember 30, 2015, from 10.5% in the year ended November 30, 2014 primarily due to improved operating leverage as a result of an increase in homedeliveries.Gross profits on land sales were $30.1 million in the year ended November 30, 2015, compared to $41.7 million in the year ended November 30,2014.Lennar Homebuilding equity in earnings (loss) from unconsolidated entities was $63.4 million in the year ended November 30, 2015, compared to($0.4) million in the year ended November 30, 2014. In the year ended November 30, 2015, Lennar Homebuilding equity in earnings from unconsolidatedentities primarily related to $82.8 million of equity in earnings from one of our unconsolidated entities, due to the sale of homesites and a commercialproperty to third parties, the sale of approximately 800 homesites to a joint venture in which we have a 50% investment, and a gain on debt extinguishment.In the year ended November 30, 2014, Lennar Homebuilding equity in loss from unconsolidated entities primarily related to our share of net operating lossesfrom various Lennar Homebuilding unconsolidated entities, which included $4.6 million of our share of valuation adjustments related to assets of LennarHomebuilding's unconsolidated entities.Lennar Homebuilding other income, net, totaled $18.6 million in the year ended November 30, 2015, compared to $7.5 million in the year endedNovember 30, 2014. In the year ended November 30, 2015, other income, net included $10.2 million aggregate gains on sales of an operating property and aclubhouse.Lennar Homebuilding interest expense was $220.1 million in the year ended November 30, 2015 ($205.2 million was included in costs of homessold, $2.5 million in costs of land sold and $12.5 million in other interest expense), compared to $201.5 million in the year ended November 30, 2014($161.4 million was included in costs of homes sold, $3.6 million in costs of land sold and $36.6 million in other interest expense). Interest expense includedin costs of homes sold increased primarily due to an increase in our outstanding debt and home deliveries.Operating earnings for our Lennar Financial Services segment were $127.8 million in the year ended November 30, 2015, compared to operatingearnings of $80.1 million in the year ended November 30, 2014. The increase in profitability was primarily due to an increase in mortgage originationsdriven by a stronger refinance market and an increase in purchase volume for both Lennar and non-Lennar homebuyers, and an increase in capture rate. Theincrease in volume also benefited the title operations.Operating earnings for our Rialto segment were $28.8 million in the year ended November 30, 2015 (which included $33.6 million of operatingearnings, partially offset by $4.8 million of net earnings attributable to noncontrolling interests), compared to operating earnings of $66.6 million in the yearended November 30, 2014 (which included $44.1 million of operating earnings and an add back of $22.5 million of net loss attributable to noncontrollinginterests).Rialto revenues were $221.9 million in the year ended November 30, 2015, compared to $230.5 million in the year ended November 30, 2014.Revenues decreased primarily due to a decrease in interest income as a result of a decrease in the portfolio of loans Rialto owns because of loan collections,resolutions and REO foreclosures and because Rialto no longer recognized interest income under the accretable yield method. Instead, interest income isrecognized to the extent that loan collections exceed their carrying value. This decrease was partially offset by an increase in securitization revenue andinterest income from RMF. In addition, in the years ended November 30, 2015 and 2014, revenues included $20.0 million and $34.7 million, respectively, ofadvance distributions with regard to Rialto's carried interests in its Funds in order to cover income tax obligations resulting from the allocations of taxableincome to Rialto’s carried interests in these funds.Rialto expenses were $222.9 million in the year ended November 30, 2015, compared to $249.1 million in the year ended November 30, 2014.Expenses decreased primarily due to a $46.8 million decrease in loan impairments, partially offset by an increase in RMF securitization expenses, generaland administrative expenses and interest expense.Rialto equity in earnings from unconsolidated entities was $22.3 million and $59.3 million in the years ended November 30, 2015 and 2014,respectively, primarily related to the segment's share of net earnings from its Funds. The decrease in equity in earnings was primarily related to smaller netincreases in the fair value of certain assets in the Rialto Funds in the year ended November 30, 2015 than in the year ended November 30, 2014.In the year ended November 30, 2015, Rialto other income, net was $12.3 million, which consisted primarily of $35.2 million of net realized gainson the sale of REO and rental income, net, partially offset by expenses related to owning and maintaining REO and $12.4 million of impairments on REO. Inthe year ended November 30, 2014, Rialto other income, net was $3.4 million, which consisted primarily of $43.7 million of net realized gains on the sale ofREO and rental income, net, partially offset by expenses related to owning and maintaining REO and $19.3 million of impairments on REO.Operating loss for our Lennar Multifamily segment was $7.2 million in the year ended November 30, 2015, compared to $11.0 million in the yearended November 30, 2014. In the year ended November 30, 2015, the operating loss in Lennar Multifamily primarily related to general and administrativeexpenses, partially offset by the segment's $22.2 million share of27Table of Contentsgains as a result of the sale of two operating properties by Lennar Multifamily's unconsolidated entities, management fee income and general contractorincome, net. In the year ended November 30, 2014, the operating loss primarily related to general and administrative expenses, partially offset by thesegment's $14.7 million share of gains as a result of the sale of two operating properties by Lennar Multifamily unconsolidated entities and management feeincome.Corporate general and administrative expenses were $216.2 million, or 2.3% as a percentage of total revenues, in the year ended November 30,2015, compared to $177.2 million, or 2.3% as a percentage of total revenues, in the year ended November 30, 2014.Net earnings (loss) attributable to noncontrolling interests were $16.3 million and ($10.2) million in the years ended November 30, 2015 and 2014,respectively. Net earnings attributable to noncontrolling interests in the year ended November 30, 2015 were primarily attributable to earnings related toLennar Homebuilding consolidated joint ventures and the FDIC's interest in the portfolio of real estate loans that we acquired in partnership with the FDIC.Net loss attributable to noncontrolling interests in the year ended November 30, 2014 was primarily due to a net loss related to the FDIC's interest in theportfolio of real estate loans that we acquired in partnership with the FDIC, partially offset by a strategic transaction by one of Lennar Homebuilding'sconsolidated joint ventures that impacted noncontrolling interests by $5.6 million.During the years ended November 30, 2015 and 2014, we had a tax provision of $390.4 million and $341.1 million, respectively. Our overalleffective tax rates were 32.72% and 34.80% for the years ended November 30, 2015 and 2014, respectively. The effective tax rate for the year endedNovember 30, 2015 included tax benefits for the domestic production activities deduction and energy tax credits, offset primarily by state income taxexpense and accruals for uncertain tax positions. The reduction was primarily from tax credits related to our increased investment in solar energy systems in2015 compared with 2014, and the retroactive enactment of the new energy efficient home credit. For the year ended November 30, 2015, the impact of thesolar energy credit on our effective tax rate was (0.91%). In addition, the new energy efficient home credit for homes delivered in 2014 was retroactivelyrestored and extended in December 2014. We were eligible for this tax credit to the extent our homes meet the energy efficiency standards required under thetax code. The impact of this legislation on the Company’s effective tax rate for the year ended November 30, 2015 was (1.01%).Homebuilding SegmentsOur Homebuilding operations construct and sell homes primarily for first-time, move-up and active adult homebuyers primarily under the Lennarbrand name. In addition, our homebuilding operations purchase, develop and sell land to third parties. In certain circumstances, we diversify our operationsthrough strategic alliances and attempt to minimize our risks by investing with third parties in joint ventures.As of and for the year ended November 30, 2016, we have aggregated our homebuilding activities into three reportable segments, which we refer toas Homebuilding East, Homebuilding Central, and Homebuilding West, based primarily upon similar economic characteristics, geography, and product type.Information about homebuilding activities in states that do not have economic characteristics that are similar to those in other states in the same geographicarea is grouped under "Homebuilding Other," which is not a reportable segment. References in this Management’s Discussion and Analysis of FinancialCondition and Results of Operations to homebuilding segments are to those three reportable segments.During the fourth quarter of 2016, we evaluated all of our reportable segments and as the Houston operating division, which previously had beenreported a separate reportable segment, did not meet the reportable criteria set forth in Accounting Standards Codification ("ASC") 280, Segment Reporting("ASC 280"), we aggregated this operating division into the Homebuilding Central reportable segment as this division exhibits similar economiccharacteristics, geography and product type as the other divisions in Homebuilding Central.In addition, during the first quarter of 2016, we made the decision to divide the Southeast Florida operating division into two operating segments tomaximize operational efficiencies given the continued growth of the division. As a result of this change in management structure, we re-evaluated ourreportable segments and determined that neither operating segment met the reportable criteria set forth in ASC 280. We aggregated these operating segmentsinto the Homebuilding East reportable segment as these divisions exhibit similar economic characteristics, geography and product type as the other divisionsin Homebuilding East.All prior year segment information has been restated to conform with the 2016 presentation. The changes in the reportable segments have no effecton our consolidated financial position, results of operations or cash flows for the periods presented.28Table of ContentsAt November 30, 2016 our reportable homebuilding segments and Homebuilding Other consisted of homebuilding divisions located in:East: Florida, Georgia, Maryland, New Jersey, North Carolina, South Carolina and VirginiaCentral: Arizona, Colorado and TexasWest: California and NevadaOther: Illinois, Minnesota, Oregon, Tennessee and WashingtonThe following tables set forth selected financial and operational information related to our homebuilding operations for the years indicated:Selected Financial and Operational Data Years Ended November 30,(In thousands)2016 2015 2014Homebuilding revenues: East: Sales of homes$3,887,217 3,524,691 2,915,463Sales of land54,119 38,987 25,116Total East3,941,336 3,563,678 2,940,579Central: Sales of homes2,218,590 1,888,126 1,584,122Sales of land64,989 56,186 65,931Total Central2,283,579 1,944,312 1,650,053West: Sales of homes2,704,670 2,338,652 1,761,762Sales of land52,988 26,867 34,613Total West2,757,658 2,365,519 1,796,375Other: Sales of homes748,040 584,435 578,295Sales of land10,724 9,001 59,828Total Other758,764 593,436 638,123Total homebuilding revenues$9,741,337 8,466,945 7,025,13029Table of Contents Years Ended November 30,(In thousands)2016 2015 2014Operating earnings: East: Sales of homes$578,207 578,185 500,412Sales of land22,035 10,448 9,160Equity in earnings (loss) from unconsolidated entities(230) 118 1,678Other income (expense), net (1)20,579 (1,615) 5,185Other interest expense(3,416) (6,273) (14,364)Total East617,175 580,863 502,071Central: Sales of homes (2)245,103 196,372 180,248Sales of land (3)2,038 13,595 17,113Equity in earnings (loss) from unconsolidated entities401 75 (10)Other income (expense), net(1,393) 775 (7,172)Other interest expense(174) (2,119) (6,972)Total Central245,975 208,698 183,207West: Sales of homes396,696 358,054 286,393Sales of land16,689 446 11,851Equity in earnings (loss) from unconsolidated entities (4)(49,731) 62,960 (1,647)Other income, net (5)33,728 17,564 7,652Other interest expense(1,036) (3,206) (11,530)Total West396,346 435,818 292,719Other: Sales of homes76,741 39,393 54,357Sales of land3,947 5,613 3,567Equity in earnings (loss) from unconsolidated entities285 220 (376)Other income, net4,463 1,892 1,861Other interest expense— (856) (3,685)Total Other85,436 46,262 55,724Total homebuilding operating earnings$1,344,932 1,271,641 1,033,721(1)Other income, net, for the year ended November 30, 2016, included gains of $14.5 million on the sales of three clubhouses. Other expense, net, for the year endedNovember 30, 2015 primarily related to a loss on a strategic sale of an operating property from one of our consolidated joint ventures, partially offset by noncontrollinginterests.(2)Sales of homes for the year ended November 30, 2014 included a $12.0 million insurance recovery and other nonrecurring items.(3)Sales of land for the year ended November 30, 2016 included $6.3 million of valuation adjustments to land we intend to sell or have sold to third parties.(4)Equity in loss from unconsolidated entities for the year ended November 30, 2016 included our share of costs associated with the FivePoint combination and operational netlosses from the new FivePoint unconsolidated entity, totaling $42.6 million, partially offset by $12.7 million of equity in earnings from one of our unconsolidated entitiesprimarily due to sales of homesites to third parties. Equity in earnings from unconsolidated entities for the year ended November 30, 2015 included $82.8 million of equity inearnings from one of our unconsolidated entities primarily due to the sale of a commercial property and homesites to third parties and a gain on debt extinguishment. Equity inloss from unconsolidated entities for the year ended November 30, 2014 included our share of operating losses from various unconsolidated entities, which included $4.3million of our share of valuation adjustments related to assets of Lennar Homebuilding's unconsolidated entities, partially offset by $4.7 million of equity in earnings as a resultof third-party land sales by one unconsolidated entity.(5)Other income, net, for the year ended November 30, 2016 included $30.1 million of management fee income and a profit participation related to Lennar Homebuilding'sstrategic joint ventures. Other income, net, for the year ended November 30, 2015 included a $6.5 million gain on the sale of an operating property.30Table of ContentsSummary of Homebuilding DataDeliveries: Years Ended November 30, Homes 2016 2015 2014East12,483 11,515 9,910Central6,788 6,171 5,638West5,734 5,245 4,141Other1,558 1,361 1,314Total26,563 24,292 21,003Of the total homes delivered listed above, 82, 83 and 32 represent home deliveries from unconsolidated entities for the years ended November 30, 2016, 2015 and 2014,respectively. Years Ended November 30, Dollar Value (In thousands) Average Sales Price 2016 2015 2014 2016 2015 2014East$3,890,405 3,527,612 2,921,080 $312,000 306,000 295,000Central2,218,590 1,888,127 1,584,122 327,000 306,000 281,000West2,757,112 2,383,432 1,775,587 481,000 454,000 429,000Other748,040 584,435 578,295 480,000 429,000 440,000Total$9,614,147 8,383,606 6,859,084 $362,000 345,000 327,000Of the total dollar value of home deliveries listed above, $55.6 million, $47.7 million and $19.4 million represent the dollar value of home deliveries from unconsolidatedentities for the years ended November 30, 2016, 2015 and 2014, respectively. The home deliveries from unconsolidated entities had an average sales price of $678,000, $575,000and $608,000 for the years ended November 30, 2016, 2015 and 2014, respectively.Sales Incentives (1): Years Ended November 30, (In thousands) 2016 2015 2014East$278,979 258,594 231,255Central183,921 153,173 134,468West101,337 80,617 59,148Other32,062 25,679 24,286Total$596,299 518,063 449,157 Years Ended November 30, Average Sales Incentives PerHome Delivered Sales Incentives as a% of Revenue 2016 2015 2014 2016 2015 2014East$22,400 22,500 23,400 6.7% 6.8% 7.4%Central27,100 24,800 23,900 7.7% 7.5% 7.8%West17,900 15,600 14,300 3.6% 3.3% 3.2%Other20,600 18,900 18,500 4.1% 4.2% 4.0%Total$22,500 21,400 21,400 5.9% 5.9% 6.2%(1)Sales incentives relate to home deliveries during the period, excluding deliveries by unconsolidated entities.31Table of ContentsNew Orders (2): Years Ended November 30, Homes 2016 2015 2014East12,764 11,579 10,123Central7,041 6,448 6,116West5,910 5,608 4,516Other1,657 1,471 1,274Total27,372 25,106 22,029Of the total new orders listed above, 23, 105 and 95 represent new orders from unconsolidated entities for the years ended November 30, 2016, 2015 and 2014,respectively. Years Ended November 30, Dollar Value (In thousands) Average Sales Price 2016 2015 2014 2016 2015 2014East$3,977,605 3,570,496 2,989,452 $312,000 308,000 295,000Central2,354,618 2,037,339 1,742,292 334,000 316,000 285,000West2,832,993 2,617,393 1,956,157 479,000 467,000 433,000Other788,721 663,247 522,411 476,000 451,000 410,000Total$9,953,937 8,888,475 7,210,312 $364,000 354,000 327,000Of the total dollar value of new orders listed above, $9.2 million, $70.2 million and $56.8 million represent the dollar value of new orders from unconsolidated entities forthe years ended November 30, 2016, 2015 and 2014, respectively. The new orders from unconsolidated entities had an average sales price of $401,000, $669,000 and $598,000 forthe years ended November 30, 2016, 2015 and 2014, respectively.(2)New orders represent the number of new sales contracts executed with homebuyers, net of cancellations, during the years ended November 30, 2016, 2015 and 2014.Backlog: November 30, Homes 2016 2015 2014East (3)3,243 2,852 2,788Central2,321 2,068 1,791West1,530 1,354 991Other (4)529 372 262Total7,623 6,646 5,832Of the total homes in backlog listed above, 30, 89 and 67 represent homes in backlog from unconsolidated entities at November 30, 2016, 2015 and 2014, respectively. November 30, Dollar Value (In thousands) Average Sales Price 2016 2015 2014 2016 2015 2014East$1,065,425 928,098 886,810 $329,000 325,000 318,000Central821,608 685,750 536,463 354,000 332,000 300,000West748,488 671,524 437,492 489,000 496,000 441,000Other256,017 192,379 113,563 484,000 517,000 433,000Total$2,891,538 2,477,751 1,974,328 $379,000 373,000 339,000Of the total dollar value of homes in backlog listed above, $16.0 million, $62.4 million and $39.8 million represent the dollar value of homes in backlog fromunconsolidated entities at November 30, 2016, 2015 and 2014, respectively. The homes in backlog from unconsolidated entities had an average sales price of $533,000, $701,000and $595,000 at November 30, 2016, 2015 and 2014, respectively.(3)During the year ended November 30, 2016, we acquired 110 homes in backlog.(4)During the year ended November 30, 2016, we acquired 58 homes in backlog.32Table of ContentsBacklog represents the number of homes under sales contracts. Homes are sold using sales contracts, which are generally accompanied by salesdeposits. In some instances, purchasers are permitted to cancel sales if they fail to qualify for financing or under certain other circumstances. We do notrecognize revenue on homes under sales contracts until the sales are closed and title passes to the new homeowners.We experienced cancellation rates in our homebuilding segments and Homebuilding Other as follows: Years Ended November 30, 2016 2015 2014East14% 15% 16%Central20% 21% 21%West15% 13% 14%Other11% 11% 13%Total16% 16% 17%Active Communities: November 30, 2016 2015 2014East303 284 265Central199 206 195West135 119 111Other58 56 54Total695 665 625Of the total active communities listed above, two communities represent active communities being developed by unconsolidated entities as of November 30, 2016. Of thetotal active communities listed above, three communities represent active communities being constructed by unconsolidated entities as of both November 30, 2015 and 2014.The following table details our gross margins on home sales for the years ended November 30, 2016, 2015 and 2014 for each of our reportablehomebuilding segments and Homebuilding Other: Years Ended November 30, (Dollars in thousands)2016 2015 2014 East: Sales of homes$3,887,217 3,524,691 2,915,463 Costs of homes sold2,935,921 2,599,855 2,112,474 Gross margins on home sales951,29624.5%924,83626.2%802,98927.5%Central: Sales of homes2,218,590 1,888,126 1,584,122 Costs of homes sold1,752,781 1,485,243 1,225,638 Gross margins on home sales465,80921.0%402,88321.3%358,48422.6%West: Sales of homes2,704,670 2,338,652 1,761,762 Costs of homes sold2,086,480 1,773,651 1,305,208 Gross margins on home sales618,19022.9%565,00124.2%456,55425.9%Other: Sales of homes748,040 584,435 578,295 Costs of homes sold587,671 474,101 460,089 Gross margins on home sales160,36921.4%110,33418.9%118,20620.4%Total gross margins on home sales$2,195,66423.0%2,003,05424.0%1,736,23325.4%33Table of Contents2016 versus 2015Homebuilding East: Revenues from home sales increased in 2016 compared to 2015, primarily due to an increase in the number of home deliveriesin all the states in the segment, except Virginia and Georgia, and an increase in the average sales price of homes delivered in all the states in the segment,except Florida. The increase in the number of deliveries was primarily driven by an increase in active communities over the last year primarily in Floridaand/or driven by higher demand as the number of deliveries per active community increased. The decrease in home deliveries in Virginia and Georgia wasprimarily driven by a decrease in active communities that had a high volume of home deliveries in 2015. The increase in the average sales price of homesdelivered was primarily due to a change in product mix as there was an increase in home deliveries in higher-priced communities in 2016 compared to thesame period last year and/or because we have been able to increase the sales price in certain of our communities due to favorable market conditions. Thedecrease in average sales price of homes delivered in Florida was primarily driven by a change in product mix due to closing out the remaining homes inhigher-priced communities in prior year and opening lower-priced communities in 2016. In addition, we have also been able to increase the sales prices incertain of our communities due to favorable market conditions. Gross margin percentage on home sales decreased compared to the same period last yearprimarily due to an increase in land and direct construction costs per home, partially offset by an increase in average sales price of homes delivered.Homebuilding Central: Revenues from home sales increased in 2016 compared to 2015, primarily due to an increase in the number of homedeliveries and in the average sales price of homes delivered in all the states in the segment. The increase in the number of deliveries was primarily driven byhigher demand as the number of deliveries per active community increased. The increase in the average sales price of homes delivered was primarily due to achange in product mix driven by an increase in home deliveries in higher-priced close out communities in 2016 compared to the same period last year and/orbecause we have been able to increase the sales prices in certain of our communities due to favorable market conditions. Gross margin percentage on homesales slightly decreased compared to the same period last year primarily due to an increase in land costs per home, partially offset by an increase in theaverage sales price of homes delivered.Homebuilding West: Revenues from home sales increased in 2016 compared to 2015, primarily due to an increase in the number of home deliveriesin California, partially offset by a decrease in the number of home deliveries in Nevada and an increase in the average sales price of homes delivered in all thestates in the segment. The increase in the number of deliveries in California was primarily driven by an increase in active communities over the last yearand/or by higher demand as the number of deliveries per active community increased. The decrease in the number of deliveries in Nevada was primarilydriven by lower demand as the number of deliveries per active community decreased due to a change in product mix (selling at different price points) fromthe same period last year. The increase in the average sales price of homes delivered was primarily due to a change in product mix (selling at different pricepoints) and/or because we have been able to increase the sales prices in certain of our communities due to favorable market conditions. Gross marginpercentage on home sales decreased compared to the same period last year primarily due to an increase in land costs per home and an increase in salesincentives offered to homebuyers as a percentage of revenues from home sales, partially offset by an increase in the average sales price of homes delivered.Homebuilding Other: Revenues from home sales increased in 2016 compared to 2015, primarily due to an increase in the number of home deliveriesin all the states in Homebuilding Other and an increase in the average sales price of homes delivered in all states in Homebuilding Other, except Minnesota.The increase in the number of deliveries was primarily driven by an increase in active communities over the last year and/or by higher demand as the numberof deliveries per active community increased. The increase in the average sales price of homes delivered was primarily due to an increase in home deliveriesin higher-priced communities in 2016 compared to the same period last year. The decrease in the average sales price of homes delivered in Minnesota wasprimarily due to the lower average sales price of the homes acquired in backlog. Gross margin percentage on home sales increased compared to the sameperiod last year primarily due to an increase in the average sales price of homes delivered and a decrease in construction and land costs per home (prior year'sland costs per home included a valuation adjustment of $9.6 million in our Northeast Urban operations).2015 versus 2014Homebuilding East: Revenues from home sales increased in 2015 compared to 2014 primarily due to an increase in the number of home deliveriesand average sales price of homes delivered in all the states of the segment. The increase in the number of deliveries was primarily driven by an increase inactive communities over 2014 and/or driven by higher demand as the number of deliveries per active community increased. The increase in the average salesprice of homes delivered was primarily because we have been able to increase the sales price of homes delivered and/or reduce sales incentives in certain ofour communities due to favorable market conditions. Gross margin percentage on homes decreased compared to 2014 primarily due to an increase in directconstruction and land costs per home, partially offset by an increase in the average sales price of homes delivered and a decrease in sales incentives offered tohomebuyers as a percentage of revenues from home sales.34Table of ContentsHomebuilding Central: Revenues from home sales increased in 2015 compared to 2014 primarily due to an increase in the number of homedeliveries in all the states of the segment, except Arizona, and an increase in the average sales price of homes delivered in all the states of the segment. Theincrease in the number of deliveries was primarily driven by an increase in active communities over 2014 and/or driven by higher demand as the number ofdeliveries per active community increased. The decrease in the number of homes delivered in Arizona was primarily due to the timing of deliveries in certainof our communities. The increase in the average sales price of homes delivered was primarily because we have been able to increase the sales price of homesdelivered and/or we have been able to reduce sales incentives in certain of our communities due to favorable market conditions. Gross margin percentage onhomes decreased compared to 2014 primarily due to an increase in land costs per home and because 2014 included $11.9 million of insurance recoveries andother nonrecurring items, which increased the gross margin percentage in 2014 by 70 basis points.Homebuilding West: Revenues from home sales increased in 2015 compared to 2014 primarily due to an increase in the number of home deliveriesand in the average sales price of homes delivered in all the states of the segment. The increase in the number of deliveries was primarily driven by an increasein active communities over 2014 and/or driven by higher demand as the number of deliveries per active community increased. The increase in the averagesales price of homes delivered was primarily because we have been able to increase the sales price of homes delivered in certain of our communities due tofavorable market conditions. Gross margin percentage on homes decreased compared to 2014 primarily due to an increase in land costs per home, whichincluded a valuation adjustment of $5.8 million in California, partially offset by an increase in the average sales price of homes delivered.Homebuilding Other: Revenues from home sales increased in 2015 compared to 2014 primarily due to an increase in the number of homes deliveredin Tennessee, Oregon and Washington driven by higher demand as the number of deliveries per active community increased. This was partially offset by adecrease in the average sales price of homes delivered in Tennessee and in our Northeast Urban operations primarily as a result of a change in product mixdue to timing of deliveries in certain communities. Gross margin percentage on homes sales decreased compared to 2014 primarily due to an increase in landcosts per home, which included a valuation adjustment of $9.6 million in our Northeast Urban operations primarily related to a strategic decision to moveforward on an inactive asset and an increase in sales incentives offered to homebuyers as a percentage of revenues from home sales.Lennar Financial Services SegmentOur Lennar Financial Services reportable segment provides mortgage financing, title insurance and closing services for both buyers of our homesand others. Our Lennar Financial Services segment sells substantially all of the loans it originates within a short period in the secondary mortgage market, themajority of which are sold on a servicing released, non-recourse basis. After the loans are sold, we retain potential liability for possible claims by purchasersthat we breached certain limited industry-standard representations and warranties in the loan sale agreements.The following table sets forth selected financial and operational information related to our Lennar Financial Services segment: Years Ended November 30,(Dollars in thousands)2016 2015 2014Revenues$687,255 620,527 454,381Costs and expenses523,638 492,732 374,243Operating earnings$163,617 127,795 80,138Dollar value of mortgages originated$9,343,000 8,877,000 5,950,000Number of mortgages originated33,500 32,600 23,300Mortgage capture rate of Lennar homebuyers82% 82% 78%Number of title and closing service transactions116,000 108,600 90,700Number of title policies issued298,900 263,500 220,400Rialto SegmentOur Rialto reportable segment is a commercial real estate investment, investment management, and finance company focused on raising, investingand managing third-party capital, originating and selling into securitizations commercial mortgage loans as well as investing our own capital in real estaterelated mortgage loans, properties and related securities. Rialto utilizes its vertically-integrated investment and operating platform to underwrite, diligence,acquire, manage, workout and add value to diverse portfolios of real estate loans, properties and securities as well as providing strategic real estate capital.Rialto's primary focus is to manage third-party capital and to originate and sell into securitizations commercial mortgage loans. Rialto has continued theworkout and/or oversight of billions of dollars of real estate assets across the United States, including commercial35Table of Contentsand residential real estate loans and properties as well as mortgage backed securities with the objective of generating superior, risk-adjusted returns. To date,many of the investment and management opportunities have arisen from the dislocation in the United States real estate markets and the restructuring andrecapitalization of those markets.Rialto's operating earnings (loss) were as follows: Years Ended November 30,(In thousands)2016 2015 2014Revenues$233,966 221,923 230,521Costs and expenses (1)229,769 222,875 249,114Rialto equity in earnings from unconsolidated entities18,961 22,293 59,277Rialto other income (expense), net(39,850) 12,254 3,395Operating earnings (loss) (2)$(16,692) 33,595 44,079(1)Costs and expenses included loan impairments of $18.2 million, $10.4 million and $57.1 million for the years ended November 30, 2016, 2015 and 2014, respectively,primarily associated with the segment's FDIC loans portfolio (before noncontrolling interests).(2)Operating earnings (loss) for the years ended November 30, 2016, 2015 and 2014 included net earnings (loss) attributable to noncontrolling interests of ($18.8) million, $4.8million and ($22.5) million, respectively.The following is a detail of Rialto other income (expense), net: Years Ended November 30,(In thousands)2016 2015 2014Realized gains on REO sales, net$17,495 35,242 43,671Unrealized losses on transfer of loans receivable to REO and impairments, net(23,087) (13,678) (26,107)REO and other expenses(54,008) (57,740) (58,067)Rental and other income (1)19,750 48,430 43,898Rialto other income (expense), net$(39,850) 12,254 3,395(1)Rental and other income for the year ended November 30, 2016, included a $16.0 million write-off of uncollectible receivables related to the hospital.Rialto Mortgage FinanceRMF originates and sells into securitizations five, seven and ten year commercial first mortgage loans, generally with principal amounts between $2million and $75 million, which are secured by income producing properties. This business has become a significant contributor to Rialto's revenues.During the year ended November 30, 2016, RMF originated loans with a total principal balance of $1.8 billion, of which $1.7 billion were recordedas loans held-for-sale and $81.2 million as accrual loans within loans receivable, net, and sold $1.9 billion of loans into 11 separate securitizations. Duringthe year ended November 30, 2015, RMF originated loans with a total principal balance of $2.7 billion and sold $2.4 billion of loans into 12 separatesecuritizations. As of November 30, 2016 and 2015, originated loans with an unpaid principal balance of $199.8 million and $151.8 million, respectively,were sold into a securitization trust but not settled and thus were included as Rialto's receivables, net.Loans ReceivableIn 2010, our Rialto segment acquired indirectly 40% managing member equity interests in two limited liability companies ("LLCs") in partnershipwith the FDIC, which retained 60% equity interests in the LLCs, for approximately $243 million (net of transaction costs and a $22 million working capitalreserve). The LLCs held performing and non-performing loans formerly owned by 22 failed financial institutions and when our Rialto segment acquired itsinterests in the LLCs, the two portfolios consisted of approximately 5,500 distressed residential and commercial real estate loans. If the LLCs exceedexpectations and meet certain internal rate of returns and distribution thresholds, our equity interest in the LLCs could be reduced from 40% down to 30%,with a corresponding increase to the FDIC’s equity interest from 60% up to 70%. As these thresholds have not been met, distributions continue being shared60% / 40% with the FDIC. During the years ended November 30, 2016 and 2015, the LLCs distributed $108.2 million and $149.7 million, respectively, ofwhich $64.9 million and $89.8 million, respectively, was distributed to the FDIC and $43.3 million and $59.9 million, respectively, was distributed to Rialto,the parent company.The LLCs met the accounting definition of variable interest entities ("VIEs") and since we were determined to be the primary beneficiary, weconsolidated the LLCs. We were determined to be the primary beneficiary because we have the power to direct the activities of the LLCs that mostsignificantly impact the LLCs’ performance through Rialto's management and36Table of Contentsservicer contracts. At November 30, 2016, these consolidated LLCs had total combined assets and liabilities of $213.8 million and $10.3 million,respectively. At November 30, 2015, these consolidated LLCs had total combined assets and liabilities of $355.2 million and $11.3 million, respectively.Also, in 2010, our Rialto segment acquired approximately 400 distressed residential and commercial real estate loans and over 300 REO propertiesfrom three financial institutions. We paid $310 million for the distressed real estate and real estate related assets of which $124 million was financed througha 5-year senior unsecured note provided by one of the selling institutions for which the maturity was subsequently extended. The remaining balance of $30.3million, which was due in December 2016, was fully paid off as of November 30, 2016.InvestmentsRialto is the sponsor of and an investor in private equity vehicles that invest in and manage real estate related assets and other related investments.These include:Private Equity VehicleInception YearCommitmentRialto Real Estate Fund, LP2010$700 million (including $75 million by us)Rialto Real Estate Fund II, LP2012$1.3 billion (including $100 million by us)Rialto Mezzanine Partners Fund, LP2013$300 million (including $34 million by us)Rialto Capital CMBS Funds2014$119 million (including $52 million by us)Rialto Real Estate Fund III2015$1.3 billion (including $100 million by us)Rialto Credit Partnership, LP2016$220 million (including $20 million by us)Rialto also earns fees for its role as a manager of these vehicles and for providing asset management and other services to those vehicles and otherthird parties.At November 30, 2016 and 2015, the carrying value of Rialto's non-investment grade commercial mortgage-backed securities ("CMBS") was $71.3million and $25.6 million, respectively. These securities were purchased at discount rates ranging from 39% to 72% with coupon rates ranging from 1.3% to4.0%, stated and assumed final distribution dates between November 2020 and November 2026, and stated maturity dates between November 2048 andMarch 2059. The Rialto segment classified these securities as held-to-maturity based on its intent and ability to hold the securities until maturity.In 2014, the Rialto segment invested $18 million in a private commercial real estate services company. The investment was carried at cost at bothNovember 30, 2016 and 2015 and is included in Rialto's other assets.Lennar Multifamily SegmentWe have been actively involved, primarily through unconsolidated entities, in the development, construction and property management ofmultifamily rental properties. Our Lennar Multifamily segment focuses on developing a geographically diversified portfolio of institutional qualitymultifamily rental properties in select U.S. markets.As of November 30, 2016 and 2015, our balance sheet had $526.1 million and $415.4 million, respectively, of assets related to our LennarMultifamily segment, which included investments in unconsolidated entities of $318.6 million and $250.9 million, respectively. Our net investment in theLennar Multifamily segment as of November 30, 2016 and 2015 was $412.9 million and $348.4 million, respectively. During the year ended November 30,2016, our Lennar Multifamily segment sold seven operating properties through its unconsolidated entities resulting in the segment's $91.0 million share ofgains. During the years ended November 30, 2015 and 2014, our Lennar Multifamily segment sold two operating properties through its unconsolidatedentities each year resulting in the segment's $22.2 million and $14.7 million share of gains, respectively. In addition, during the year ended November 30,2016, our Lennar Multifamily segment sold land to third parties generating gross profit of $5.6 million.Our Lennar Multifamily segment had equity investments in 28 and 29 unconsolidated entities (including the Lennar Multifamily Venture, the"Venture") as of November 30, 2016 and 2015, respectively. As of November 30, 2016, our Lennar Multifamily segment had interests in 53 communities withdevelopment costs of $4.8 billion, of which five communities were completed and operating, 13 communities were partially completed and leasing, 24communities were under construction and the remaining communities were either owned or under contract. As of November 30, 2016, our LennarMultifamily segment also had a pipeline of potential future projects totaling $2.8 billion in assets across a number of states that would be developedprimarily by future unconsolidated entities.37Table of ContentsIn 2015, the Lennar Multifamily segment completed the initial closing of the Venture for the development, construction and property managementof class-A multifamily assets and in October 2016, the Lennar Multifamily segment finalized the fund raising for the Venture with commitments totaling $2.2billion, including a $504 million co-investment commitment by us.Financial Condition and Capital ResourcesAt November 30, 2016, we had cash and cash equivalents related to our homebuilding, financial services, Rialto and multifamily operations of $1.3billion, compared to $1.2 billion and $1.3 billion at November 30, 2015 and 2014, respectively.We finance all of our activities including Homebuilding, financial services, Rialto, multifamily and general operating needs primarily with cashgenerated from our operations, debt issuances and equity offerings as well as cash borrowed under our warehouse lines of credit and our credit facility.Operating Cash Flow ActivitiesDuring 2016, 2015 and 2014, cash provided by (used in) operating activities totaled $507.8 million, ($419.6) million and ($788.5) million,respectively. During 2016, cash provided by operating activities was positively impacted by our net earnings, a net decrease in loans held-for-sale primarilyrelated to RMF due to the timing of the securitizations and an increase in accounts payable and other liabilities, partially offset by a smaller increase ininventories than in previous years due to our soft-pivot strategy, and an increase in receivables and other assets. For the year ended November 30, 2016,distributions of earnings from unconsolidated entities were (1) $1.7 million from Lennar Homebuilding unconsolidated entities, (2) $14.0 million from Rialtounconsolidated entities, and (3) $86.3 million from Lennar Multifamily unconsolidated entities.During 2015, cash used in operating activities was impacted by an increase in inventories due to strategic land purchases and land developmentcosts, an increase of $213.5 million in Rialto loans held-for-sale related to RMF and an increase of $105.2 million in Lennar Financial Services loans held-for-sale, partially offset by our net earnings and an increase in accounts payable and other liabilities. For the year ended November 30, 2015, distributions ofearnings from unconsolidated entities were (1) $26.3 million from Lennar Homebuilding unconsolidated entities, (2) $13.3 million from Rialtounconsolidated entities, and (3) $21.1 million from Lennar Multifamily unconsolidated entities.During 2014, cash used in operating activities was impacted by an increase in inventories due to strategic land purchases and land developmentcosts, an increase of $326.1 million in Lennar Financial Services loans held-for-sale due to increased home deliveries towards the end of 2014 and an increasein receivables, partially offset by our net earnings and an increase in accounts payable and other liabilities. For the year ended November 30, 2014,distributions of earnings from unconsolidated were (1) $5.3 million from Lennar Homebuilding unconsolidated entities, (2) $2.5 million from Rialtounconsolidated entities, and (3) $14.5 million from Lennar Multifamily unconsolidated entities.Investing Cash Flow ActivitiesDuring 2016, 2015 and 2014, cash (used in) provided by investing activities totaled ($85.8) million, ($98.4) million and $438.4 million,respectively. During 2016, our cash used in investing activities was primarily impacted by cash contributions to unconsolidated entities of (1) $198.2 millionto Lennar Multifamily unconsolidated entities primarily related to contributions to the Venture (2) $184.2 million to Lennar Homebuilding unconsolidatedentities primarily for working capital, and (3) $43.4 million to Rialto unconsolidated entities comprised of $28.8 million contributed to the Rialto CapitalCMBS Funds ("CMBS Funds"), $7.2 million contributed to Rialto Real Estate Fund III ("Fund III"), $5.7 million contributed to the Rialto Credit Partnership,LP ("RCP") and $1.7 million contributed to other investments. In addition, cash used in investing activities was impacted by purchases of CMBS by ourRialto segment and origination of loans receivable primarily related to floating rate loans originated by RMF. This was partially offset by distributions ofcapital from unconsolidated entities of (1) $251.2 million from Lennar Multifamily unconsolidated entities, of which $193.7 million was distributed by theVenture, (2) $44.6 million from Lennar Homebuilding unconsolidated entities, and (3) $27.4 million from Rialto unconsolidated entities comprised of $12.8million distributed by Rialto Real Estate Fund II, LP (" Fund II"), $11.7 million distributed by the Rialto Mezzanine Partners Fund, LP ("Mezzanine Fund")and $2.9 million distributed by the CMBS Funds; by the receipt of $97.9 million of proceeds from the sales of REO; and $84.4 million of receipts ofprincipal payments on loans receivable and settlement of accrual loans.During 2015, our cash used in investing activities was primarily impacted by cash contributions to unconsolidated entities of (1) $210.7 million toLennar Homebuilding unconsolidated entities primarily for working capital, (2) $63.0 million to Rialto unconsolidated entities comprised of $41.7 millioncontributed to Fund II, $13.3 million contributed to the Mezzanine Fund and $8.0 million contributed to the CMBS Funds, and (3) $41.3 million to LennarMultifamily unconsolidated entities primarily for working capital. In addition, cash used in investing activities was impacted by purchases of investmentsecurities and loans held-for-investments. This was partially offset by the receipt of $73.7 million of proceeds from the sale of a Lennar Homebuildingoperating property, $155.3 million of proceeds from the sales of REO and by distributions of capital from38Table of Contentsunconsolidated entities of (1) $118.0 million from Lennar Homebuilding unconsolidated entities, (2) $78.1 million from Lennar Multifamily unconsolidatedentities, of which $55.3 million was distributed by the Venture, and (3) $22.9 million from Rialto unconsolidated entities comprised of $16.9 milliondistributed by Fund II, $3.4 million distributed by the Mezzanine Fund and $2.6 million distributed by the CMBS Funds.During 2014, our cash provided by investing activities was primarily related to the receipt of $269.7 million of proceeds from the sale of REO, $43.9million of proceeds from the sale of a Lennar Homebuilding operating property and $51.9 million of proceeds from the sale of Lennar Homebuildinginvestments available-for-sale. In addition, cash provided by investing activities increased due to distributions of capital from unconsolidated entities of (1)$143.5 million from Lennar Homebuilding unconsolidated entities, (2) $66.9 million from Lennar Multifamily unconsolidated entities, and (3) $68.9 millionfrom Rialto unconsolidated entities comprised of $32.5 million distributed by Rialto Real Estate Fund, LP, $9.0 million distributed by Fund II, $16.5 milliondistributed by the Mezzanine Fund and $10.9 million distributed by the CMBS Funds. This was partially offset by $21.3 million for purchases of LennarHomebuilding investments available-for-sale and by cash contributions to unconsolidated entities of (1) $87.5 million to Lennar Homebuildingunconsolidated entities primarily for working capital, (2) $41.5 million to Rialto unconsolidated entities comprised of $7.6 million contributed to Fund II,$18.1 million contributed to the Mezzanine Fund and $15.8 million contributed to the CMBS Funds, and (3) $30.8 million to Lennar Multifamilyunconsolidated entities primarily for working capital.Financing Cash Flow ActivitiesDuring 2016, 2015 and 2014, our cash (used in) provided by financing activities totaled ($250.9) million, $394.7 million and $661.4 million,respectively. During 2016, our cash used in financing activities was primarily impacted by (1) the redemption of $250 million aggregate principal amount ofour 6.50% senior notes due April 2016 (the "6.50% Senior Notes"), (2) $234.0 million of cash payments in connection with exchanges or conversions of our2.75% convertible senior notes due December 2020 (the "2.75% Convertible Senior Notes"), (3) $211.0 million of principal payments on other borrowings,(4) $111.3 million of net repayments under our Rialto's warehouse repurchase facilities, and (5) $127.4 million of payments related to noncontrollinginterests. The cash used in financing activities was partially offset by the receipt of proceeds of the sale of $500 million aggregate principal amount of our4.750% senior notes due 2021 (the "4.750% Senior Notes") and $218.8 million of net borrowings under our Lennar Financial Services' warehouse repurchasefacilities.During 2015, our cash provided by financing activities was primarily attributed to the receipt of proceeds related to the sale of (1) $400 millionaggregate principal amount of 4.875% senior notes due 2023, (2) an additional $250 million aggregate principal amount of our 4.50% senior notes dueNovember 2019, and (3) $500 million aggregate principal amount of our 4.750% senior notes due 2025; proceeds of $101.6 million from other borrowings;and net borrowings of $366.3 million under our Lennar Financial Services' and Rialto's warehouse repurchase facilities. This cash provided by financingactivities was partially offset by the redemption of $500 million principal amount of our 5.60% senior notes due 2015, exchanges and conversions of $212.1million principal amount of our 2.75% Convertible Senior Notes, principal payments of $258.1 million on other borrowings, and payments of $133.4 millionrelated to noncontrolling interests.During 2014, our cash provided by financing activities was primarily attributed to the receipt of proceeds related to the sale of (1) $500 millionaggregate principal amount of our 4.500% senior notes due June 2019, (2) $350 million aggregate principal amount of our 4.50% senior notes due November2019, and (3) an additional $100 million aggregate principal amount of Rialto's 7.00% senior notes due 2018 (the "7.00% Senior Notes"); proceeds of $94.4million related to the issuance of Rialto's structured note offerings (the "Structured Notes"); and net borrowings of $389.5 million under our Lennar FinancialServices' and Rialto's warehouse repurchase facilities. The cash provided by financing activities was partially offset by the redemption of $250 millionprincipal amount of our 5.50% senior notes due 2014, principal payments of $299.7 million on other borrowings, and payments of $155.6 million related tononcontrolling interests.39Table of ContentsDebt to total capital ratios are financial measures commonly used in the homebuilding industry and are presented to assist in understanding theleverage of our Lennar Homebuilding operations. Lennar Homebuilding debt to total capital and net Lennar Homebuilding debt to total capital werecalculated as follows: November 30,(Dollars in thousands)2016 2015Lennar Homebuilding debt$4,575,977 5,025,130Stockholders’ equity7,026,042 5,648,944Total capital$11,602,019 10,674,074Lennar Homebuilding debt to total capital39.4% 47.1%Lennar Homebuilding debt$4,575,977 5,025,130Less: Lennar Homebuilding cash and cash equivalents1,050,138 893,408Net Lennar Homebuilding debt$3,525,839 4,131,722Net Lennar Homebuilding debt to total capital (1)33.4% 42.2% (1)Net Lennar Homebuilding debt to total capital is a non-GAAP financial measure defined as net Lennar Homebuilding debt (Lennar Homebuilding debt less LennarHomebuilding cash and cash equivalents) divided by total capital (net Lennar Homebuilding debt plus stockholders' equity). We believe the ratio of net Lennar Homebuildingdebt to total capital is a relevant and a useful financial measure to investors in understanding the leverage employed in our Lennar Homebuilding operations. However, becausenet Lennar Homebuilding debt to total capital is not calculated in accordance with GAAP, this financial measure should not be considered in isolation or as an alternative tofinancial measures prescribed by GAAP. Rather, this non-GAAP financial measure should be used to supplement our GAAP results.At November 30, 2016, Lennar Homebuilding debt to total capital was lower compared to the prior year period, primarily as a result of an increase instockholder’s equity primarily related to our net earnings and the conversion of all of our 3.25% convertible senior notes due 2021 (the "3.25% ConvertibleSenior Notes") to stockholder's equity and a decrease in Lennar Homebuilding debt.We are continually exploring various types of transactions to manage our leverage and liquidity positions, take advantage of market opportunitiesand increase our revenues and earnings. These transactions may include the issuance of additional indebtedness, the repurchase of our outstandingindebtedness for cash or equity, the acquisition of homebuilders and other companies, the purchase or sale of assets or lines of business, the issuance ofcommon stock or securities convertible into shares of common stock, and/or pursuing other financing alternatives. In connection with some of our morerecently formed businesses, such as Rialto and Lennar Multifamily, we may also consider other types of transactions such as restructurings, joint ventures,spin-offs or initial public offerings. If any of these transactions are implemented, they could materially impact the amount and composition of ourindebtedness outstanding, increase our interest expense, dilute our existing stockholders and/or affect the net book value of our assets. At November 30,2016, we had no agreements or understandings regarding any significant transactions other than an agreement to acquire WCI.On September 22, 2016, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with WCI under which we will acquire WCIthrough a merger for a combination of our Class A common stock and cash totaling $23.50 per share of WCI common stock. It is currently anticipated that themerger consideration payable to WCI stockholders will be $11.75 in cash and $11.75 in Class A common stock, with the Class A common stock valued at theaverage of its volume weighted average price on the New York Stock Exchange ("NYSE") on each of the ten NYSE trading days before closing. For example,if the merger consideration is paid half in cash and half on our Class A common stock, based on the volume weighted average price of our Class A commonstock on the ten NYSE trading days ended January 11, 2017, which was approximately $43.50 per share, a WCI stockholder would receive approximately0.27 shares of our Class A common stock (as well as $11.75 in cash) with regard to each share of WCI common stock. However, we have the right to reducethe portion of the merger consideration that will be Class A common stock and increase the portion that will be cash, including the right to make the entiremerger consideration cash. WCI can terminate the Merger Agreement to engage in a transaction that its Board of Directors deems to be more favorable to itsstockholders than the transaction with the Company, unless the Company will match the deemed more favorable transaction. However, if WCI terminates theMerger Agreement to engage in another transaction, it will have to pay the Company a termination fee of $22.5 million. The Merger Agreement containscustomary representations and warranties by the parties, and is subject to closing conditions, including the need for approval by the holders of WCI’scommon stock. It is anticipated that a meeting of WCI stockholders to vote on the transaction will be held in February 2017, and, if the transaction isapproved by the WCI stockholders, it will close promptly after the stockholder vote.40Table of ContentsThe following table summarizes our Lennar Homebuilding senior notes and other debts payable: November 30,(Dollars in thousands)2016 201512.25% senior notes due 2017$398,232 396,2524.75% senior notes due December 2017398,479 397,7366.95% senior notes due 2018248,474 247,6324.125% senior notes due December 2018273,889 273,3194.500% senior notes due 2019498,002 497,2104.50% senior notes due 2019597,474 596,6224.750% senior notes due 2021496,547 —4.750% senior notes due 2022568,404 567,3254.875% senior notes due December 2023394,170 393,5454.750% senior notes due 2025496,226 495,7846.50% senior notes due 2016— 249,9052.75% convertible senior notes due 2020— 233,2253.25% convertible senior notes due 2021— 398,194Mortgages notes on land and other debt206,080 278,381 $4,575,977 5,025,130Our Lennar Homebuilding average debt outstanding was $5.1 billion with an average rate for interest incurred of 5.1% for the year endedNovember 30, 2016, compared to $5.2 billion with an average rate for interest incurred of 4.9% for the year ended November 30, 2015. Interest incurredrelated to Lennar Homebuilding debt for the year ended November 30, 2016 was $281.4 million, compared to $288.5 million in 2015. The majority of ourshort-term financing needs, including financings for land acquisition and development activities and general operating needs, are met with cash generatedfrom operations, proceeds from debt as well as borrowings under our Credit Facility.The terms of each of our senior notes outstanding at November 30, 2016 were as follows:Senior Notes Outstanding (1) PrincipalAmount Net Proceeds(2) Price Dates Issued(Dollars in thousands) 12.25% senior notes due 2017 $400,000 $386,700 98.098% April 20094.75% senior notes due December 2017 400,000 395,900 100% July 2012, August 20126.95% senior notes due 2018 250,000 243,900 98.929% May 20104.125% senior notes due December 2018 275,000 271,718 99.998% February 20134.500% senior notes due 2019 500,000 495,725 (3) February 20144.50% senior notes due 2019 600,000 595,801 (4) November 2014, February 20154.750% senior notes due 2021 500,000 495,974 100% March 20164.750% senior notes due 2022 575,000 567,585 (5) October 2012, February 2013, April 20134.875% senior notes due December 2023 400,000 393,622 99.169% November 20154.750% senior notes due 2025 500,000 495,528 100% April 2015(1)Interest is payable semi-annually for each of the series of senior notes. The senior notes are unsecured and unsubordinated, but are guaranteed by substantially all of the our100% owned homebuilding subsidiaries.(2)We generally uses the net proceeds for working capital and general corporate purposes, which can include the repayment or repurchase of other outstanding senior notes.(3)We issued $400 million aggregate principal amount at a price of 100% and $100 million aggregate principal amount at a price of 100.5%.(4)We issued $350 million aggregate principal amount at a price of 100% and $250 million aggregate principal amount at a price of 100.25%.(5)We issued $350 million aggregate principal amount at a price of 100%, $175 million aggregate principal amount at a price of 98.073% and $50 million aggregate principalamount at a price of 98.250%.41Table of ContentsIn March 2016, we retired our 6.50% Senior Notes for 100% of the $250 million outstanding principal amount, plus accrued and unpaid interest.During the year ended November 30, 2016, all of the $400 million aggregate principal amount of the 3.25% Convertible Senior Notes wereconverted or redeemed for 17.0 million shares of Class A common stock, plus accrued and unpaid interest through the date of the conversions/redemptionsand small cash premiums. The 3.25% Convertible Senior Notes were converted or redeemed at the initial conversion rate of 42.5555 shares of Class Acommon stock per $1,000 principal amount of the 3.25% Convertible Senior Notes, which is equivalent to an initial conversion price of approximately$23.50 per share of Class A common stock.During the year ended November 30, 2016, all of the remaining $234 million in aggregate outstanding principal amount of the 2.75% ConvertibleSenior Notes were converted or exchanged by the holders for approximately $234 million in cash and 5.2 million shares of Class A common stock, plusaccrued and unpaid interest with respect to the exchanges. The 2.75% Convertible Senior Notes were convertible into cash, shares of Class A common stockor a combination of both, at our election. However, we settled the face value of the 2.75% Convertible Senior Notes in cash. Holders converted or exchangedthe 2.75% Convertible Senior Notes at the initial conversion rate of 45.1794 shares of Class A common stock per $1,000 principal amount, which isequivalent to an initial conversion price of approximately $22.13 per share of Class A common stock.Subsequent to November 30, 2016, we issued $600 million aggregate principal amount of 4.125% senior notes due 2022 (the "4.125% SeniorNotes") at a price of 100%. Proceeds from the offering, after underwriting fees but before expenses, are estimated to be $596.1 million. We will use the netproceeds from the sales of the 4.125% Senior Notes to fund all or a portion of the cash consideration for our acquisition of WCI, to pay costs and expensesrelated to the acquisition of WCI and/or for general corporate purposes, which may include the repayment or repurchase of our debt. Interest on the 4.125%Senior Notes is due semi-annually beginning July 15, 2017. The 4.125% Senior Notes are unsecured and unsubordinated, but are guaranteed by substantiallyall of our 100% owned homebuilding subsidiaries.Currently, substantially all of our 100% owned homebuilding subsidiaries are guaranteeing all of our senior notes (the "Guaranteed Notes"). Theguarantees are full and unconditional. The principal reason our 100% owned homebuilding subsidiaries are guaranteeing the Guaranteed Notes is so holdersof the Guaranteed Notes will have rights at least as great with regard to those subsidiaries as any other holders of a material amount of our unsecured debt.Therefore, the guarantees of the Guaranteed Notes will remain in effect with regard to a guarantor subsidiary only while it guarantees a material amount of thedebt of Lennar Corporation, as a separate entity, to others. At any time when a guarantor subsidiary is no longer guaranteeing at least $75 million of LennarCorporation’s debt other than the Guaranteed Notes, either directly or by guaranteeing other subsidiaries’ obligations as guarantors of Lennar Corporation’sdebt, the guarantor subsidiary’s guarantee of the Guaranteed Notes will be suspended. Therefore, if the guarantor subsidiaries cease guaranteeing LennarCorporation’s obligations under our Credit Facility and our letter of credit facilities and are not guarantors of any new debt, the guarantor subsidiaries’guarantees of the Guaranteed Notes will be suspended until such time, if any, as they again are guaranteeing at least $75 million of Lennar Corporation’s debtother than the Guaranteed Notes.If our guarantor subsidiaries are guaranteeing revolving credit lines totaling at least $75 million, we will treat the guarantees of the GuaranteedNotes as remaining in effect even during periods when Lennar Corporation’s borrowings under the revolving credit lines are less than $75 million. Asubsidiary will be released from its guarantee and any other obligations it may have regarding the senior notes if all or substantially all its assets, or all of itscapital stock, are sold or otherwise disposed of.In June 2016, we amended our Credit Facility to increase the maximum borrowings from $1.6 billion to $1.8 billion. The maturity for $1.3 billion ofthe Credit Facility was extended from June 2019 to June 2020, with the remaining $160 million maturing in June 2018. As of November 30, 2016, the CreditFacility included a $298 million accordion feature, subject to additional commitments, with certain financial institutions. The proceeds available under theCredit Facility, which are subject to specified conditions for borrowing, may be used for working capital and general corporate purposes. The creditagreement also provides that up to $500 million in commitments may be used for letters of credit. As of both November 30, 2016 and 2015, we had nooutstanding borrowings under the Credit Facility. We may from time to time, borrow and repay amounts under the Credit Facility. Consequently, the amountoutstanding under the Credit Facility at the end of the period may not be reflective of the total amounts outstanding during the period. In addition, we had$320 million letter of credit facilities with different financial institutions at November 30, 2016.Under the amended Credit Facility agreement executed in June 2016 (the "Credit Agreement"), as of the end of each fiscal quarter, we are required tomaintain minimum consolidated tangible net worth of approximately $1.5 billion plus the sum of 50% of the cumulative consolidated net income fromFebruary 29, 2012, if positive, and 50% of the net cash proceeds from any equity offerings from and after February 29, 2012 minus the lesser of 50% of theamount paid after June 24, 2016 to repurchase common stock and $100 million. We are required to maintain a leverage ratio that shall not exceed 65% andmay be reduced by 2.5% per quarter if our interest coverage ratio is less than 2.25:1.00 for two consecutive fiscal calendar quarters. The42Table of Contentsleverage ratio will have a floor of 60%. If our interest coverage ratio subsequently exceeds 2.25:1.00 for two consecutive fiscal calendar quarters, the leverageratio we will be required to maintain will be increased by 2.5% per quarter to a maximum of 65%. As of the end of each fiscal quarter, we are also required tomaintain either (1) liquidity in an amount equal to or greater than 1.00x consolidated interest incurred for the last twelve months then ended or (2) an interestcoverage ratio equal to or greater than 1.50:1.00 for the last twelve months then ended. We believe that we were in compliance with our debt covenants atNovember 30, 2016The following summarizes our required debt covenants and our actual levels or ratios with respect to those covenants as calculated per the CreditAgreement as of November 30, 2016:(Dollars in thousands)Covenant Level Level Achieved as of November30, 2016Minimum net worth test$3,000,798 5,769,195Maximum leverage ratio65.0% 35.4%Liquidity test (1)1.00 3.87(1)We are only required to maintain either (1) liquidity in an amount equal to or greater than 1.00x consolidated interest incurred for the last twelve months then ended or (2) aninterest coverage ratio of equal to or greater than 1.50:1.00 for the last twelve months then ended. Although we are in compliance with our debt covenants for both calculations,we have only disclosed our liquidity test.The terms minimum net worth test, maximum leverage ratio, liquidity test and interest coverage ratio used in the Credit Agreement are specificallycalculated per the Credit Agreement and differ in specified ways from comparable GAAP or common usage terms.Our performance letters of credit outstanding were $270.8 million and $236.5 million at November 30, 2016 and 2015, respectively. Our financialletters of credit outstanding were $210.3 million and $216.7 million at November 30, 2016 and 2015, respectively. Performance letters of credit are generallyposted with regulatory bodies to guarantee the performance of certain development and construction activities. Financial letters of credit are generally postedin lieu of cash deposits on option contracts, for insurance risks, credit enhancements and as other collateral. Additionally, at November 30, 2016, we hadoutstanding surety bonds of $1.4 billion including performance surety bonds related to site improvements at various projects (including certain projects ofour joint ventures) and financial surety bonds including $223.4 million related to pending litigation.Our Lennar Financial Services segment's warehouse facilities at November 30, 2016 were as follows:(In thousands)Maximum AggregateCommitment364-day warehouse repurchase facility that matures December 2016 (1)(2)$400,000364-day warehouse repurchase facility that matures June 2017 (3)600,000364-day warehouse repurchase facility that matures September 2017300,000Total$1,300,000(1)Maximum aggregate commitment includes an uncommitted amount of $250 million.(2)Subsequent to November 30, 2016, the warehouse repurchase facility maturity date was extended to December 2017.(3)In accordance with the amended warehouse repurchase facility agreement, the maximum aggregate commitment will be decreased to $400 million in the first quarter of fiscal2017 and will be increased to $600 million in the second quarter of fiscal 2017.Our Lennar Financial Services segment uses these facilities to finance its lending activities until the mortgage loans are sold to investors and theproceeds are collected. The facilities are non-recourse to us and are expected to be renewed or replaced with other facilities when they mature. Borrowingsunder the facilities and their prior year predecessors were $1.1 billion and $858.3 million, at November 30, 2016 and 2015, respectively, and werecollateralized by mortgage loans and receivables on loans sold to investors but not yet paid for with outstanding principal balances of $1.1 billion and$916.9 million, at November 30, 2016 and 2015, respectively. The combined effective interest rate on the facilities at November 30, 2016 was 2.9%. If thefacilities are not renewed or replaced, the borrowings under the lines of credit will be paid off by selling the mortgage loans held-for-sale to investors and bycollecting on receivables on loans sold but not yet paid. Without the facilities, the Lennar Financial Services segment would have to use cash fromoperations and other funding sources to finance its lending activities.43Table of ContentsAt November 30, 2016, RMF warehouse facilities were as follows:(In thousands)Maximum AggregateCommitment364-day warehouse repurchase facility that matures April 2017 (1)(2)$500,000364-day warehouse repurchase facility that matures January 2017 (1)250,000Warehouse repurchase facility that matures December 2017 (1)200,000Warehouse repurchase facility that matures August 2018 (two - one year extensions) (3)100,000Totals$1,050,000(1)RMF uses these facilities to finance its loan origination and securitization business.(2)The warehouse repurchase facility has the option of an additional six month extension.(3)Rialto uses this warehouse repurchase facility to finance the origination of floating rate accrual loans which are reported as accrual loans within loans receivable, net.Borrowings under this facility were $43.3 million and $36.3 million as of November 30, 2016 and 2015, respectively.Borrowings under the facilities that finance RMF's loan originations and securitization activities were $180.2 million and $317.1 million as ofNovember 30, 2016 and 2015, respectively and were secured by a 75% interest in the originated commercial loans financed. The facilities require immediaterepayment of the 75% interest in the secured commercial loans when the loans are sold in a securitization and the proceeds are collected. These warehouserepurchase facilities are non-recourse to us and are expected to be renewed or replaced with other facilities when they mature.As of November 30, 2016 and 2015, the carrying amount, net of debt issuance costs, of Rialto's 7.00% Senior Notes was $348.7 million and $347.9million, respectively. Under the indenture, Rialto is subject to certain covenants limiting, among other things, Rialto’s ability to incur indebtedness, to makeinvestments, to make distributions to, or enter into transactions with Lennar or to create liens, subject to certain exceptions and qualifications. Rialto also hasquarterly and annual reporting requirements, similar to an SEC registrant, to holders of the 7.00% Senior Notes. We believe Rialto was in compliance with itsdebt covenants at November 30, 2016.As of November 30, 2016 and 2015, the outstanding amount, net of debt issuance costs, related to Rialto's Structured Notes was $23.9 million and$31.3 million, respectively. The estimated final payment date is December 15, 2017.In November 2016, Rialto paid the remaining outstanding principal amount of $30.3 million related to a $124 million 5-year senior unsecured noteprovided by one of the selling institutions in the 2010 acquisition of a portfolio of distressed residential and commercial real estate loans and REO propertiesacquired from three financial institutions.Changes in Capital StructureWe have a stock repurchase program adopted in 2001, which originally authorized us to purchase up to 20 million shares of our outstandingcommon stock. During the years ended November 30, 2016, 2015 and 2014, there were no share repurchases of common stock under the stock repurchaseprogram. As of November 30, 2016, the remaining authorized shares that can be purchased under the stock repurchase program were 6.2 million shares ofcommon stock.During the years ended November 30, 2016 and 2015, treasury stock increased by 0.1 million shares and 0.3 million shares, respectively, of Class Acommon stock primarily due to activity related to our equity compensation plan.During the years ended November 30, 2016, 2015 and 2014, our Class A and Class B common stockholders received a per share annual dividend of$0.16.Based on our current financial condition and credit relationships, we believe that our operations and borrowing resources will provide for our currentand long-term capital requirements at our anticipated levels of activity.44Table of ContentsOff-Balance Sheet ArrangementsLennar Homebuilding - Investments in Unconsolidated EntitiesAt November 30, 2016, we had equity investments in 38 homebuilding and land unconsolidated entities (of which 2 had recourse debt, 9 had non-recourse debt and 27 had no debt), compared to 34 homebuilding and land unconsolidated entities at November 30, 2015. Historically, we have invested inunconsolidated entities that acquired and developed land (1) for our homebuilding operations or for sale to third parties or (2) for the construction of homesfor sale to third-party homebuyers. Through these entities, we have primarily sought to reduce and share our risk by limiting the amount of our capitalinvested in land, while obtaining access to potential future homesites and allowing us to participate in strategic ventures. The use of these entities also, insome instances, has enabled us to acquire land to which we could not otherwise obtain access, or could not obtain access on as favorable terms, without theparticipation of a strategic partner. Participants in these joint ventures have been land owners/developers, other homebuilders and financial or strategicpartners. Joint ventures with land owners/developers have given us access to homesites owned or controlled by our partners. Joint ventures with otherhomebuilders have provided us with the ability to bid jointly with our partners for large land parcels. Joint ventures with financial partners have allowed usto combine our homebuilding expertise with access to our partners’ capital. Joint ventures with strategic partners have allowed us to combine ourhomebuilding expertise with the specific expertise (e.g. commercial or infill experience) of our partner. Each joint venture is governed by an executivecommittee consisting of members from the partners.Although the strategic purposes of our joint ventures and the nature of our joint ventures partners vary, the joint ventures are generally designed toacquire, develop and/or sell specific assets during a limited life-time. The joint ventures are typically structured through non-corporate entities in whichcontrol is shared with our venture partners. Each joint venture is unique in terms of its funding requirements and liquidity needs. We and the other jointventure participants typically make pro-rata cash contributions to the joint venture. In many cases, our risk is limited to our equity contribution and potentialfuture capital contributions. Additionally, most joint ventures obtain third-party debt to fund a portion of the acquisition, development and constructioncosts of their communities. The joint venture agreements usually permit, but do not require, the joint ventures to make additional capital calls in the future.However, capital calls relating to the repayment of joint venture debt under payment guarantees generally is required.Under the terms of our joint venture agreements, we generally have the right to share in earnings and distributions of the entities on a pro-rata basisbased on our ownership percentage. Some joint venture agreements provide for a different allocation of profit and cash distributions if and when thecumulative results of the joint venture exceed specified targets (such as a specified internal rate of return). Lennar Homebuilding equity in earnings (loss)from unconsolidated entities excludes our pro-rata share of joint ventures’ earnings resulting from land sales to our homebuilding divisions. Instead, weaccount for those earnings as a reduction of our costs of purchasing the land from the joint ventures or reduce the investment in certain cost sharingunconsolidated entities. This in effect defers recognition of our share of the joint ventures’ earnings related to these sales until we deliver a home and titlepasses to a third-party homebuyer.In many instances, we are designated as the manager of a venture under the direction of a management committee that has shared power among thepartners of the unconsolidated entity and we receive fees for such services. In addition, we often enter into option and purchase contracts to acquire propertiesfrom our joint ventures, generally for market prices at specified dates in the future. Option contracts generally require us to make deposits using cash orirrevocable letters of credit toward the exercise price. These option deposits are generally negotiated on a case by case basis.We regularly monitor the results of our unconsolidated joint ventures and any trends that may affect their future liquidity or results of operations.Joint ventures in which we have investments may be subject to a variety of financial and non-financial debt covenants related primarily to equitymaintenance, fair value of collateral and minimum homesite takedown or sale requirements. We monitor the performance of joint ventures in which we haveinvestments on a regular basis to assess compliance with debt covenants. For those joint ventures not in compliance with the debt covenants, we evaluate andassess possible impairment of our investment.Our arrangements with joint ventures generally do not restrict our activities or those of the other participants. However, in certain instances, we agreenot to engage in some types of activities that may be viewed as competitive with the activities of these ventures in the localities where the joint ventures dobusiness.As discussed above, the joint ventures in which we invest generally supplement equity contributions with third-party debt to finance their activities.In some instances, the debt financing is non-recourse, thus neither we nor the other equity partners are a party to the debt instruments. In other cases, we andthe other partners agree to provide credit support in the form of repayment guarantees.Material contractual obligations of our unconsolidated joint ventures primarily relate to the debt obligations described above. The joint venturesgenerally do not enter into lease commitments because the entities are managed either by us, or another of the joint venture participants, who supply thenecessary facilities and employee services in exchange for market-45Table of Contentsbased management fees. However, they do enter into management contracts with the participants who manage them. Some joint ventures also enter intoagreements with developers, which may be us or other joint venture participants, to develop raw land into finished homesites or to build homes.The joint ventures often enter into option or purchase agreements with buyers, which may include us or other joint venture participants, to deliverhomesites or parcels in the future at market prices. Option deposits are recorded by the joint ventures as liabilities until the exercise dates at which time thedeposit and remaining exercise proceeds are recorded as revenue. Any forfeited deposit is recognized as revenue at the time of forfeiture. Our unconsolidatedjoint ventures generally do not enter into off-balance sheet arrangements.As described above, the liquidity needs of joint ventures in which we have investments vary on an entity-by-entity basis depending on each entity’spurpose and the stage in its life cycle. During formation and development activities, the entities generally require cash, which is provided through acombination of equity contributions and debt financing, to fund acquisition and development of properties. As the properties are completed and sold, cashgenerated is available to repay debt and for distribution to the joint venture’s members. Thus, the amount of cash available for a joint venture to distribute atany given time is primarily a function of the scope of the joint venture’s activities and the stage in the joint venture’s life cycle.We track our share of cumulative earnings and cumulative distributions of our joint ventures. For purposes of classifying distributions received fromjoint ventures in our statements of cash flows, cumulative distributions are treated as returns on capital to the extent of cumulative earnings and included inour consolidated statements of cash flows as cash flow from operating activities. Cumulative distributions in excess of our share of cumulative earnings aretreated as returns of capital and included in our consolidated statements of cash flows as cash flows from investing activities.Summarized financial information on a combined 100% basis related to Lennar Homebuilding’s unconsolidated entities that are accounted for bythe equity method was as follows:Statements of Operations and Selected Information Years Ended November 30,(Dollars in thousands)2016 2015 2014Revenues$439,874 1,309,517 263,395Costs and expenses578,831 969,509 291,993Other income— 49,343 —Net earnings (loss) of unconsolidated entities$(138,957) 389,351 (28,598)Lennar Homebuilding equity in earnings (loss) from unconsolidated entities$(49,275) 63,373 (355)Lennar Homebuilding cumulative share of net earnings - deferred at November 30$41,495 42,651 6,593Lennar Homebuilding investments in unconsolidated entities$811,723 741,551 656,837Equity of the unconsolidated entities$3,765,336 2,692,360 2,278,941Lennar Homebuilding investment % in the unconsolidated entities (1)22% 28% 29%(1)Our share of profit and cash distributions from the sales of land could be higher compared to our ownership interest in unconsolidated entities if certain specified internal rateof return or cash flow milestones are achieved.For the year ended November 30, 2016, Lennar Homebuilding equity in loss from unconsolidated entities was primarily attributable to our share ofcosts associated with the FivePoint combination (discussed in the following page) and operational net losses from the new FivePoint unconsolidated entity,totaling $42.6 million. This was partially offset by $12.7 million of equity in earnings primarily due to sales of homesites to third parties by one of ourunconsolidated entities.For the year ended November 30, 2015, Lennar Homebuilding equity in earnings included $82.8 million of equity in earnings from one of ourunconsolidated entities primarily due to (1) sales of approximately 800 homesites to a joint venture in which we have a 50% investment and for which ourportion of the gross profit from the sale was deferred, (2) sales of approximately 700 homesites and a commercial property to third parties and (3) a gain ondebt extinguishment. In addition, for the year ended November 30, 2015, net earnings of unconsolidated entities included sales of approximately 300homesites to us by one of our unconsolidated entities that resulted in $49.3 million of gross profit, of which our portion was deferred.For the year ended November 30, 2014, Lennar Homebuilding equity in loss from unconsolidated entities related primarily to our share of operatinglosses from various Lennar Homebuilding unconsolidated entities, which included $4.6 million of valuation adjustments related to assets of LennarHomebuilding's unconsolidated entities, partially offset by $4.7 million of equity in earnings as a result of third-party land sales by one unconsolidatedentity.46Table of ContentsBalance Sheets November 30,(In thousands)2016 2015Assets: Cash and cash equivalents$221,334 248,980Inventories3,889,795 3,059,054Other assets1,338,302 465,404 $5,449,431 3,773,438Liabilities and equity: Accounts payable and other liabilities$791,245 288,192Debt892,850 792,886Equity3,765,336 2,692,360 $5,449,431 3,773,438On May 2, 2016 (the "Closing Date"), we contributed, or obtained the right to contribute, our investment in three strategic joint ventures previouslymanaged by FivePoint Communities in exchange for an investment in a FivePoint entity. The fair values of the assets contributed to this FivePoint entity,included within the unconsolidated entities summarized condensed balance sheet presented above, are preliminary and may be adjusted when additionalinformation is obtained during the transaction’s measurement period (a period of up to one year from the Closing Date) that may change the fair valueallocation as of the acquisition date. A portion of the assets of one of the three strategic joint ventures was retained by us and our venture partner in a newunconsolidated entity. The transactions did not have a material impact to our financial position or cash flows. We recorded our share of combination costs inequity in loss from unconsolidated entities on our consolidated statement of operations for the year ended November 30, 2016.As of November 30, 2016 and 2015, our recorded investments in Lennar Homebuilding unconsolidated entities were $811.7 million and $741.6million, respectively, while the underlying equity in Lennar Homebuilding unconsolidated entities partners’ net assets as of November 30, 2016 and 2015was $1.2 billion and $839.5 million, respectively. The basis difference is primarily as a result of us contributing our investment in three strategic jointventures with a higher fair value than book value for an investment in the FivePoint entity and deferring equity in earnings on land sales to us.During the year ended November 30, 2015, one of our unconsolidated entities sold approximately 800 homesites to a joint venture, in which wehave a 50% investment, for $472 million of which $320 million was financed through a non-recourse note. This transaction resulted in $157.4 million ofgross profit, of which our portion was deferred. In addition, this transaction resulted in an increase in inventory, other assets and debt of the LennarHomebuilding unconsolidated entities reflected in the summarized condensed financial information presented in the previous table for the year endedNovember 30, 2015.The Lennar Homebuilding unconsolidated entities in which we have investments usually finance their activities with a combination of partnerequity and debt financing. In some instances, we and our partners have guaranteed debt of certain unconsolidated entities.Debt to total capital of the Lennar Homebuilding unconsolidated entities in which we have investments was calculated as follows: November 30,(Dollars in thousands)2016 2015Debt$892,850 792,886Equity3,765,336 2,692,360Total capital$4,658,186 3,485,246Debt to total capital of our unconsolidated entities19.2% 22.7%Our investments in Lennar Homebuilding unconsolidated entities by type of venture were as follows: November 30,(In thousands)2016 2015Land development$787,138 691,850Homebuilding24,585 49,701Total investments$811,723 741,55147Table of ContentsIndebtedness of an unconsolidated entity is secured by its own assets. Some unconsolidated entities own multiple properties and other assets. Thereis no cross collateralization of debt of different unconsolidated entities. We also do not use our investment in one unconsolidated entity as collateral for thedebt of another unconsolidated entity or commingle funds among Lennar Homebuilding unconsolidated entities.In connection with loans to a Lennar Homebuilding unconsolidated entity, we and our partners often guarantee to a lender, either jointly andseverally or on a several basis, any or all of the following: (i) the completion of the development, in whole or in part, (ii) indemnification of the lender fromenvironmental issues, (iii) indemnification of the lender from "bad boy acts" of the unconsolidated entity (or full recourse liability in the event of anunauthorized transfer or bankruptcy) and (iv) that the loan to value and/or loan to cost will not exceed a certain percentage (maintenance or remarginingguarantee) or that a percentage of the outstanding loan will be repaid (repayment guarantee).In connection with loans to an unconsolidated entity where there is a joint and several guarantee, we sometimes have a reimbursement agreementwith our partner. The reimbursement agreement provides that neither party is responsible for more than its proportionate share of the guarantee. However, ifour joint venture partner does not have adequate financial resources to meet its obligations under the reimbursement agreement, we may be liable for morethan our proportionate share, up to our maximum exposure, which is the full amount covered by the joint and several guarantee.The total debt of Lennar Homebuilding unconsolidated entities in which we have investments, including Lennar's maximum recourse exposure,were as follows: November 30,(Dollars in thousands)2016 2015Non-recourse bank debt and other debt (partner’s share of several recourse)$48,945 50,411Non-recourse land seller debt and other debt (1)323,995 324,000Non-recourse debt with completion guarantees147,100 146,760Non-recourse debt without completion guarantees320,372 260,734Non-recourse debt to the Lennar840,412 781,905Lennar’s maximum recourse exposure (2)52,438 10,981Total debt$892,850 792,886Lennar’s maximum recourse exposure as a % of total JV debt6% 1%(1)Non-recourse land seller debt and other debt as of both November 30, 2016 and 2015, included a $320 million non-recourse note related to a transaction between one of ourunconsolidated entities and another unconsolidated joint venture, described previously, which was settled subsequent to November 30, 2016.(2)As of November 30, 2016, the increase in our maximum recourse exposure was primarily related to us providing a repayment guarantee on an unconsolidated entity's debt.During the year ended November 30, 2016, our maximum recourse exposure related to indebtedness of Lennar Homebuilding unconsolidatedentities increased by $41.5 million, as a result of us providing a repayment guarantee of $43.4 million on a Lennar Homebuilding unconsolidated entity'sdebt, partially offset by $0.9 million of commitment reductions primarily through capital contributions to unconsolidated entities and by $1.0 millionprimarily related to the joint ventures selling assets.The recourse debt exposure in the previous table represents our maximum exposure to loss from guarantees and does not take into account theunderlying value of the collateral or the other assets of the borrowers that are available to repay debt or to reimburse us for any payments on our guarantees.In addition, in most instances in which we have guaranteed debt of a Lennar Homebuilding unconsolidated entity, our partners have also guaranteedthat debt and are required to contribute their share of the guarantee payment. In a repayment guarantee, we and our venture partners guarantee repayment of aportion or all of the debt in the event of a default before the lender would have to exercise its rights against the collateral.In connection with many of the loans to Lennar Homebuilding unconsolidated entities, we and our joint venture partners (or entities related to them)have been required to give guarantees of completion to the lenders. Those completion guarantees may require that the guarantors complete the constructionof the improvements for which the financing was obtained. If the construction is to be done in phases, the guarantee generally is limited to completing onlythe phases as to which construction has already commenced and for which loan proceeds were used.If we are required to make a payment under any guarantee, the payment would generally constitute a capital contribution or loan to the LennarHomebuilding unconsolidated entity and increase our share of any funds the unconsolidated entity distributes.48Table of ContentsAs of November 30, 2016 and 2015, the fair values of the repayment and completion guarantees were not material. We believe that as ofNovember 30, 2016, in the event we become legally obligated to perform under a guarantee of the obligation of a Lennar Homebuilding unconsolidatedentity due to a triggering event under a guarantee, the collateral is expected to be sufficient to repay at least a significant portion of the obligation or we andour partners would contribute additional capital into the venture. In certain instances, we have placed performance letters of credit and surety bonds withmunicipalities for our joint ventures (see Note 6 of the notes to our consolidated financial statements).In view of credit market conditions during the past several years, it is not uncommon for lenders and/or real estate developers, including jointventures in which we have interests, to assert non-monetary defaults (such as failure to meet construction completion deadlines or declines in the marketvalue of collateral below required amounts) or technical monetary defaults against the real estate developers. In most instances, those asserted defaults areresolved by modifications of the loan terms, additional equity investments or other concessions by the borrowers. In addition, in some instances, real estatedevelopers, including joint ventures in which we have interests, are forced to request temporary waivers of covenants in loan documents or modifications ofloan terms, which are often, but not always obtained. However, in some instances developers, including joint ventures in which we have interests, are not ableto meet their monetary obligations to lenders, and are thus declared in default. Because we sometimes guarantee all or portions of the obligations to lendersof joint ventures in which we have interests, when these joint ventures default on their obligations, lenders may or may not have claims against us. Normally,we do not make payments with regard to guarantees of joint venture obligations while the joint ventures are contesting assertions regarding sums due to theirlenders. When it is determined that a joint venture is obligated to make a payment that we have guaranteed and the joint venture will not be able to make thatpayment, we accrue the amounts probable to be paid by us as a liability. Although we generally fulfill our guarantee obligations within a reasonable timeafter we determine that we are obligated with regard to them, at any point in time it is possible that we will have some balance of unpaid guarantee liability.At both November 30, 2016 and 2015, we had no liabilities accrued for unpaid guarantees of joint venture indebtedness on our consolidated balance sheets.The following table summarizes the principal maturities of our Lennar Homebuilding unconsolidated entities ("JVs") debt as per current debtarrangements as of November 30, 2016 and it does not represent estimates of future cash payments that will be made to reduce debt balances. Many JV loanshave extension options in the loan agreements that would allow the loans to be extended into future years. Principal Maturities of Unconsolidated JVs by Period(In thousands) Total JVDebt 2017 2018 2019 Thereafter OtherDebt (1)Maximum recourse debt exposure to Lennar $52,438 9,015 — 38,136 5,287 —Debt without recourse to Lennar 840,412 79,719 148,868 214,846 72,984 323,995Total $892,850 88,734 148,868 252,982 78,271 323,995(1)Represents land seller debt and other debt of which $320 million was due and settled in December 2016.49Table of ContentsThe table below indicates the assets, debt and equity of our 10 largest Lennar Homebuilding unconsolidated joint venture investments as ofNovember 30, 2016:(Dollars in thousands)Lennar’sInvestment Total JVAssets MaximumRecourseDebtExposureto Lennar TotalDebtWithoutRecourseto Lennar Total JVDebt Total JVEquity JV Debtto TotalCapitalRatioTop Ten JVs (1): FivePoint (2)$255,649 2,126,717 — 69,303 69,303 1,520,563 4%Heritage Fields El Toro146,091 1,494,232 — 9,703 9,703 1,309,979 1%Heritage Hills Irvine (3)63,304 511,328 — — — 171,878 —Runkle Canyon45,163 134,633 — 42,861 42,861 90,326 32%Treasure Island Community Development42,216 147,600 — 54,177 54,177 84,464 39%Ballpark Village29,112 100,535 — 25,235 25,235 60,225 30%Krome Groves Land Trust21,366 89,733 9,015 19,240 28,255 59,049 32%MS Rialto Residential Holdings20,448 83,280 — — — 80,816 —Fifth Wall Ventures SPV I20,359 20,365 — — — 20,361 —Willow Springs Properties19,017 34,212 — — — 32,301 —10 largest JV investments662,725 4,742,635 9,015 220,519 229,534 3,429,962 6%Other JVs148,998 706,796 43,423 295,898 339,321 335,374 50%Total$811,723 5,449,431 52,438 516,417 568,855 3,765,336 13%Land seller debt and other debt (3) — 323,995 323,995 Total JV debt 52,438 840,412 892,850 (1)The 10 largest joint ventures presented above represent the majority of total JVs assets and equity and 17% of total JV maximum recourse debt exposure to Lennar and 43% oftotal JV debt without recourse to Lennar. In addition, all of the joint ventures presented in the table above operate in our Homebuilding West segment except for Krome GrovesLand Trust, which operates in our Homebuilding East segment and Willow Springs Properties, which operates in our Homebuilding Central segment.(2)The amounts presented above for FivePoint are preliminary and may be adjusted when additional information is obtained during the transaction's measurement period (a periodof up to one year from the FivePoint combination).(3)The Heritage Hills Irvine JV has a $320 million non-recourse note payable to Heritage Fields El Toro that was settled subsequent to November 30, 2016, which is included inland seller debt and other debt line item in the table. Rialto - Investments in Unconsolidated EntitiesThe following table reflects Rialto's investments in funds that invest in and manage real estate related assets and other investments: November 30, 2016 November 30, 2016 November 30, 2015(In thousands)InceptionYear EquityCommitments EquityCommitmentsCalled Commitment toFund by theCompany Funds Contributedby the Company InvestmentRialto Real Estate Fund, LP2010 $700,006 $700,006 $75,000 $75,000 $58,116 68,570Rialto Real Estate Fund II, LP2012 1,305,000 1,305,000 100,000 100,000 96,192 99,947Rialto Mezzanine Partners Fund, LP2013 300,000 300,000 33,799 33,799 23,643 32,344Rialto Capital CMBS Funds2014 119,174 119,174 52,474 52,474 50,519 23,233Rialto Real Estate Fund III2015 1,289,180 128,871 100,000 7,239 9,093 —Rialto Credit Partnership, LP2016 220,000 63,150 19,999 5,741 5,794 —Other investments 2,384 775 $245,741 224,869During the years ended November 30, 2016, 2015, and 2014, Rialto's share of earnings from unconsolidated entities was $19.0 million, $22.3million and $59.3 million, respectively.50Table of ContentsAs manager of real estate funds, we are entitled to receive additional revenue through carried interests if the funds meet certain performancethresholds. The amounts presented in the table below are advance distributions received related to Rialto's carried interests in order to cover income taxobligations resulting from allocations of taxable income to its carried interests in its real estate funds. These advance distributions are not subject toclawbacks but will reduce future carried interest payments to which Rialto becomes entitled from the applicable funds and have been recorded as revenues.Advance distributions received during the years ended November 30, 2016 and 2015 were as follows: Years Ended November 30,(In thousands)2016 2015 2014Rialto Real Estate Fund, LP$7,633 9,588 34,693Rialto Real Estate Fund II, LP100 9,383 —Rialto Mezzanine Partners Fund, LP750 513 —Rialto Capital CMBS Funds1,639 516 — $10,122 20,000 34,693The following table represents amounts Rialto would have received had the funds ceased operations and hypothetically liquidated all theirinvestments at their estimated fair values on November 30, 2016, both gross and net of amounts already received as advanced tax distributions. The actualamounts Rialto may receive could be materially different from amounts presented in the table below.(In thousands)Hypothetical CarriedInterest Paid as Advanced TaxDistribution Hypothetical CarriedInterest, NetRialto Real Estate Fund, LP$168,925 51,913 117,012Rialto Real Estate Fund II, LP (1)33,551 9,484 24,067 $202,476 61,397 141,079(1)Net of interests of participating employees (refer to paragraph below).During 2015, Rialto adopted a Carried Interest Incentive Plan (the "Plan"), under which participating employees in the aggregate may receive up to40% of the equity units of a limited liability company (a "Carried Interest Entity") that is entitled to distributions made by a fund or other investment vehicle(a "Fund") managed by a subsidiary of Rialto. As such, those employees receiving equity units in a Carried Interest Entity may benefit from distributionsmade by a Fund to the extent the Carried Interest Entity makes distributions to its equity holders. The units issued to employees are equity awards and aresubject to vesting schedules and forfeiture or repurchase provisions in the case of termination of employment.Summarized condensed financial information on a combined 100% basis related to Rialto’s investments in unconsolidated entities that areaccounted for by the equity method was as follows:Balance Sheets November 30,(In thousands)2016 2015Assets: Cash and cash equivalents$230,229 188,147Loans receivable406,812 473,997Real estate owned439,191 506,609Investment securities1,379,155 1,092,476Investments in partnerships398,535 429,979Other assets31,902 30,340 $2,885,824 2,721,548Liabilities and equity: Accounts payable and other liabilities$36,131 29,462Notes payable535,130 374,498Equity2,314,563 2,317,588 $2,885,824 2,721,54851Table of ContentsStatements of Operations and Selected Information Years Ended November 30,(In thousands)2016 2015 2014Revenues$200,346 170,921 150,452Costs and expenses96,343 97,162 95,629Other income, net (1)49,342 144,941 479,929Net earnings of unconsolidated entities$153,345 218,700 534,752Rialto equity in earnings from unconsolidated entities$18,961 22,293 59,277Rialto's investments in unconsolidated entities$245,741 224,869 175,700Equity of the unconsolidated entities$2,314,563 2,317,588 1,767,912Rialto's investment % in the unconsolidated entities11% 10% 10%(1)Other income, net, included realized and unrealized gains (losses) on investments.Lennar Multifamily - Investments in Unconsolidated EntitiesAt November 30, 2016, Lennar Multifamily had equity investments in 28 unconsolidated entities that are engaged in multifamily residentialdevelopments (of which 18 had non-recourse debt and 10 had no debt), compared to 29 unconsolidated entities at November 30, 2015. We invest inunconsolidated entities that acquire and develop land to construct multifamily rental properties. Through these entities, we are focusing on developing ageographically diversified portfolio of institutional quality multifamily rental properties in select U.S. markets. Participants in these joint ventures have beenfinancial partners. Joint ventures with financial partners have allowed us to combine our development and construction expertise with access to our partners’capital. Each joint venture is governed by an operating agreement that provides significant substantive participating voting rights on major decisions to ourpartners.In 2015, the Lennar Multifamily segment completed the initial closing of the Venture for the development, construction and property managementof class-A multifamily assets with $1.1 billion of commitments. During the year ended November 30, 2016, the Venture received an additional $1.1 billion ofequity commitments, completing the fund raising for the Venture and increasing its total commitments to $2.2 billion, including a $504 million co-investment commitment by us comprised of cash, undeveloped land and preacquisition costs. The Venture is currently seeded with 33 undevelopedmultifamily assets that were previously purchased or under contract by the Lennar Multifamily segment totaling approximately 9,800 apartments withprojected project costs of $3.4 billion as of November 30, 2016. During the year ended November 30, 2016, $656.1 million in equity commitments werecalled, of which we contributed our portion of $203.8 million. During the year ended November 30, 2016, we received net distributions of $113.7 million asreturn of capital from the Venture when bringing new investors into the Venture. As of November 30, 2016, $931.6 million of the $2.2 billion in equitycommitments had been called, of which we have contributed $215.8 million representing our pro-rata portion of the called equity, resulting in a remainingequity commitment for us of $288.2 million. As of November 30, 2016 and 2015, the carrying value of our investment in the Venture was $198.2 million and$122.5 million, respectively.The joint ventures are typically structured through non-corporate entities in which control is shared with our venture partners. Each joint venture isunique in terms of its funding requirements and liquidity needs. We and the other joint venture participants typically make pro-rata cash contributions to thejoint venture except for cost over-runs relating to the construction of the project. In all cases, we have been required to provide guarantees of completion andcost over-runs to the lenders and partners. These completion guarantees may require us to complete the improvements for which the financing was obtained.Therefore, our risk is limited to our equity contribution, draws on letters of credit and potential future payments under the guarantees of completion and costover-runs. In certain instances, payments made under the cost over-run guarantees are considered capital contributions.Additionally, the joint ventures obtain third-party debt to fund a portion of the acquisition, development and construction costs of the rentalprojects. The joint venture agreements usually permit, but do not require, the joint ventures to make additional capital calls in the future. However, the jointventure debt does not have repayment or maintenance guarantees. Neither we nor the other equity partners are a party to the debt instruments. In some cases,we agree to provide credit support in the form of a letter of credit provided to the bank.We regularly monitor the results of our unconsolidated joint ventures and any trends that may affect their future liquidity or results of operations.We also monitor the performance of joint ventures in which we have investments on a regular basis to assess compliance with debt covenants. For those jointventures not in compliance with the debt covenants, we evaluate and assess possible impairment of our investment. We believe all of the joint ventures werein compliance with their debt covenants at November 30, 2016.52Table of ContentsUnder the terms of our joint venture agreements, we generally have the right to share in earnings and distributions of the entities on a pro-rata basisbased on our ownership percentages. Most joint venture agreements provide for a different allocation of profit and cash distributions if and when thecumulative results of the joint venture exceed specified targets (such as a specified internal rate of return).In many instances, we are designated as the development manager and/or the general contractor and/or the property manager of the unconsolidatedentity and receive fees for such services. In addition, we do not plan to enter into option and purchase contracts to acquire properties from our LennarMultifamily joint ventures.Our arrangements with joint ventures generally do not restrict our activities or those of the other participants. However, in certain instances, we agreenot to engage in some types of activities that may be viewed as competitive with the activities of these ventures in the localities where the joint ventures dobusiness.Material contractual obligations of our unconsolidated joint ventures primarily relate to the debt obligations described above. The joint venturesgenerally do not enter into lease commitments because the entities are managed either by us or the other partners, who supply the necessary facilities andemployee services in exchange for market-based management fees. However, they do enter into management contracts with the participants who managethem.As described above, the liquidity needs of joint ventures in which we have investments vary on an entity-by-entity basis depending on each entity’spurpose and the stage in its life cycle. During formation and development activities, the entities generally require cash, which is provided through acombination of equity contributions and debt financing, to fund acquisition, development and construction of multifamily rental properties. As theproperties are completed and sold, cash generated will be available to repay debt and for distribution to the joint venture’s members. Thus, the amount ofcash available for a joint venture to distribute at any given time is primarily a function of the scope of the joint venture’s activities and the stage in the jointventure’s life cycle.Summarized financial information on a combined 100% basis related to Lennar Multifamily’s investments in unconsolidated entities that areaccounted for by the equity method was as follows:Balance Sheets November 30,(In thousands)2016 2015Assets: Cash and cash equivalents$43,658 39,579Operating properties and equipment2,210,627 1,398,244Other assets46,015 25,925 $2,300,300 1,463,748Liabilities and equity: Accounts payable and other liabilities$196,617 179,551Notes payable589,397 466,724Equity1,514,286 817,473 $2,300,300 1,463,748The following table summarizes the principal maturities of our Lennar Multifamily unconsolidated entities debt as per current debt arrangements asof November 30, 2016 and does not represent estimates of future cash payments that will be made to reduce debt balances. Principal Maturities of Lennar Multifamily Unconsolidated JVs by Period(In thousands) Total JVDebt 2017 2018 2019 ThereafterDebt without recourse to Lennar Multifamily $589,397 304,220 119,590 90,983 74,60453Table of ContentsStatements of Operations and Selected Information Years Ended November 30,(In thousands)2016 2015 2014Revenues$45,287 16,309 4,855Costs and expenses68,976 27,190 7,435Other income, net191,385 43,340 35,068Net earnings of unconsolidated entities$167,696 32,459 32,488Lennar Multifamily equity in earnings from unconsolidated entities (1)$85,519 19,518 14,454Our investments in unconsolidated entities$318,559 250,876 105,674Equity of the unconsolidated entities$1,514,286 817,473 426,793Our investment % in the unconsolidated entities (2)21% 31% 25%(1)During the year ended November 30, 2016, Lennar Multifamily equity in earnings from unconsolidated entities included the segment's $91.0 million share of gains as a resultof the sale of seven operating properties by its unconsolidated entities. During the years ended November 30, 2015 and 2014, Lennar Multifamily equity in earnings fromunconsolidated entities included the segment's $22.2 million and $14.7 million share of gains, respectively, as a result of the sale of two operating properties each year by itsunconsolidated entities.(2)Our share of profit and cash distributions from sales of operating properties could be higher compared to our ownership interest in unconsolidated entities if certain specifiedinternal rate of return milestones are achieved.Option ContractsWe often obtain access to land through option contracts, which generally enable us to control portions of properties owned by third parties(including land funds) and unconsolidated entities until we have determined whether to exercise the options.The table below indicates the number of homesites owned and homesites to which we had access through option contracts with third parties("optioned") or unconsolidated JVs (i.e., controlled homesites) at November 30, 2016 and 2015: Controlled Homesites November 30, 2016Optioned JVs Total OwnedHomesites TotalHomesitesEast17,185 482 17,667 51,453 69,120Central5,726 1,135 6,861 32,690 39,551West2,409 4,899 7,308 35,451 42,759Other1,330 — 1,330 6,285 7,615Total homesites26,650 6,516 33,166 125,879 159,045 Controlled Homesites November 30, 2015Optioned JVs Total OwnedHomesites TotalHomesitesEast21,922 494 22,416 50,212 72,628Central7,823 1,135 8,958 31,301 40,259West2,172 4,829 7,001 37,934 44,935Other1,574 — 1,574 6,467 8,041Total homesites33,491 6,458 39,949 125,914 165,863We evaluate all option contracts for land to determine whether they are VIEs and, if so, whether we are the primary beneficiary of certain of theseoption contracts. Although we do not have legal title to the optioned land, if we are deemed to be the primary beneficiary or make a significant deposit foroptioned land, we may need to consolidate the land under option at the purchase price of the optioned land.During the year ended November 30, 2016, consolidated inventory not owned increased by $62.2 million with a corresponding increase toliabilities related to consolidated inventory not owned in the accompanying consolidated balance sheet as of November 30, 2016. The increase was primarilyrelated to the consolidation of an option agreement, partially offset by us exercising our option to acquire land under previously consolidated contracts. Toreflect the purchase price of the inventory consolidated, we had a net reclass related to option deposits from land under development to consolidatedinventory not owned in the accompanying consolidated balance sheet as of November 30, 2016. The liabilities related to consolidated54Table of Contentsinventory not owned primarily represent the difference between the option exercise prices for the optioned land and our cash deposits.Our exposure to loss related to our option contracts with third parties and unconsolidated entities consisted of our non-refundable option depositsand pre-acquisition costs totaling $85.0 million and $89.2 million at November 30, 2016 and 2015, respectively. Additionally, we had posted $45.1 millionand $70.4 million of letters of credit in lieu of cash deposits under certain land and option contracts as of November 30, 2016 and 2015, respectively.Contractual Obligations and Commercial CommitmentsThe following table summarizes certain of our contractual obligations at November 30, 2016: Payments Due by Period(In thousands)Total Less than1 year 1 to 3years 3 to 5years More than5 yearsLennar Homebuilding - Senior notes and other debts payable(1)$4,605,330 478,333 2,078,329 523,718 1,524,950Lennar Financial Services - Notes and other debts payable1,077,228 1,077,045 183 — —Rialto - Notes and other debts payable (2)624,689 249,186 375,503 — —Interest commitments under interest bearing debt (3)930,940 251,344 340,822 178,627 160,147Operating leases148,189 39,607 58,696 33,766 16,120Other contractual obligations (4)395,219 250,419 108,800 36,000 —Total contractual obligations (5)$7,781,595 2,345,934 2,962,333 772,111 1,701,217(1)The amounts presented in the table above exclude debt issuance costs and any discounts/premiums. Subsequent to November 30, 2016, we issued $600 million aggregateprincipal amount of 4.125% senior notes due 2022.(2)Amounts include notes payable and other debts payable of $351.0 million related to Rialto's 7.00% Senior Notes, $223.5 million related to the Rialto warehouse repurchasefacilities and $23.9 million related to Rialto's Structured Notes with an estimated final payment date of December 15, 2017. These amounts exclude debt issuance costs.(3)Interest commitments on variable interest-bearing debt are determined based on the interest rate as of November 30, 2016.(4)Amounts include $288.2 million remaining equity commitment to fund the Venture for future expenditures related to the construction and development of the projects, $92.8million of commitments to fund Rialto's Fund III and $14.3 million of commitments to fund Rialto's RCP.(5)Total contractual obligations exclude our gross unrecognized tax benefits and accrued interest and penalties totaling $58.3 million as of November 30, 2016, because we areunable to make reasonable estimates as to the period of cash settlement with the respective taxing authorities.We are subject to the usual obligations associated with entering into contracts (including option contracts) for the purchase, development and saleof real estate in the routine conduct of our business. Option contracts for the purchase of land generally enable us to defer acquiring portions of propertiesowned by third parties and unconsolidated entities until we have determined whether to exercise our options. This reduces our financial risk associated withland holdings. At November 30, 2016, we had access to 33,166 homesites through option contracts with third parties and unconsolidated entities in which wehave investments. At November 30, 2016, we had $85.0 million of non-refundable option deposits and pre-acquisition costs related to certain of thesehomesites and had posted $45.1 million of letters of credit in lieu of cash deposits under certain land and option contracts.At November 30, 2016, we had letters of credit outstanding in the amount of $481.1 million (which included the $45.1 million of letters of creditdiscussed above). These letters of credit are generally posted either with regulatory bodies to guarantee our performance of certain development andconstruction activities, or in lieu of cash deposits on option contracts, for insurance risks, credit enhancements and as other collateral. Additionally, atNovember 30, 2016, we had outstanding surety bonds of $1.4 billion including performance surety bonds related to site improvements at various projects(including certain projects of our joint ventures) and financial surety bonds including $223.4 million related to pending litigation. Although significantdevelopment and construction activities have been completed related to these site improvements, these bonds are generally not released until all of thedevelopment and construction activities are completed. As of November 30, 2016, there were approximately $488.9 million, or 42%, of anticipated futurecosts to complete related to these site improvements. We do not presently anticipate any draws upon these bonds or letters of credit, but if any such drawsoccur, we do not believe they would have a material effect on our financial position, results of operations or cash flows.Our Lennar Financial Services segment had a pipeline of loan applications in process of $2.2 billion at November 30, 2016. Loans in process forwhich interest rates were committed to the borrowers totaled approximately $629.1 million as of November 30, 2016. Substantially all of these commitmentswere for periods of 60 days or less. Since a portion of these55Table of Contentscommitments is expected to expire without being exercised by the borrowers or borrowers may not meet certain criteria at the time of closing, the totalcommitments do not necessarily represent future cash requirements.Our Lennar Financial Services segment uses mandatory mortgage-backed securities ("MBS") forward commitments, option contracts, future contractsand investor commitments to hedge our mortgage-related interest rate exposure. These instruments involve, to varying degrees, elements of credit and interestrate risk. Credit risk associated with MBS forward commitments, option contracts, future contracts and loan sales transactions is managed by limiting ourcounterparties to investment banks, federally regulated bank affiliates and other investors meeting our credit standards. Our risk, in the event of default by thepurchaser, is the difference between the contract price and fair value of the MBS forward commitments and option contracts. At November 30, 2016, we hadopen commitments amounting to $1.2 billion to sell MBS with varying settlement dates through February 2017 and open future contracts in the amount of$476.0 million with the settlement dates through September 2023.The following sections discuss market and financing risk, seasonality and interest rates and changing prices that may have an impact on ourbusiness:Market and Financing RiskWe finance our contributions to JVs, land acquisition and development activities, construction activities, financial services activities, Rialtoactivities, Lennar Multifamily activities and general operating needs primarily with cash generated from operations, debt and equity issuances, as well asborrowings under our Credit Facility and warehouse repurchase facilities. We also purchase land under option agreements, which enables us to controlhomesites until we have determined whether to exercise the options. We try to manage the financial risks of adverse market conditions associated with landholdings by what we believe to be prudent underwriting of land purchases in areas we view as desirable growth markets, careful management of the landdevelopment process and, until recent years, limitation of risks by using partners to share the costs of purchasing and developing land as well as obtainingaccess to land through option contracts. Although we believed our land underwriting standards were conservative, we did not anticipate the severe decline inland values and the sharply reduced demand for new homes encountered in the prior economic downturn.SeasonalityWe historically have experienced, and expect to continue to experience, variability in quarterly results. Our homebuilding business is seasonal innature and generally reflects higher levels of new home order activity in our second fiscal quarter and increased deliveries in the second half of our fiscalyear. However, periods of economic downturn in the industry can alter seasonal patterns.Interest Rates and Changing PricesInflation can have a long-term impact on us because increasing costs of land, materials and labor result in a need to increase the sales prices ofhomes. In addition, inflation is often accompanied by higher interest rates, which can have a negative impact on housing demand and the costs of financingland development activities and housing construction. Rising interest rates as well as increased material and labor costs, may reduce gross margins. Anincrease in material and labor costs is particularly a problem during a period of declining home prices. Conversely, deflation can impact the value of realestate and make it difficult for us to recover our land costs. Therefore, either inflation or deflation could adversely impact our future results of operations.New Accounting PronouncementsSee Note 1 of the notes to our consolidated financial statements for a comprehensive list of new accounting pronouncements.Critical Accounting Policies and EstimatesOur accounting policies are more fully described in Note 1 of the notes to our consolidated financial statements included in Item 8 of this document.As discussed in Note 1, the preparation of financial statements in conformity with accounting principles generally accepted in the United States of Americarequires management to make estimates and assumptions about future events that affect the amounts reported in our consolidated financial statements andaccompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires theexercise of judgment. Actual results could differ from those estimates, and such differences may be material to our consolidated financial statements. Listedbelow are those policies and estimates that we believe are critical and require the use of significant judgment in their application.56Table of ContentsValuation of Deferred Tax AssetsWe record income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future taxconsequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective taxbases and attributable to operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to applyin the years in which the temporary differences are expected to be recovered or paid. The effect on deferred tax assets and liabilities of a change in tax rates isrecognized in earnings in the period when the changes are enacted. Interest related to unrecognized tax benefits is recognized in the financial statements as acomponent of income tax expense.A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on the available evidence, it is more likelythan not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed each reporting periodby us based on the consolidation of all available positive and negative evidence using a "more-likely-than-not" standard with respect to whether deferred taxassets will be realized. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, actual earnings,forecasts of future profitability, the duration of statutory carryforward periods, our experience with loss carryforwards not expiring unused and tax planningalternatives.We believe that the accounting estimate for the valuation of deferred tax assets is a critical accounting estimate because of the judgment required inassessing the likely future tax consequences of events that have been recognized in our financial statements or tax returns. We base our estimate of deferredtax assets and liabilities on current tax laws and rates and, in certain cases, business plans and other expectations about future outcomes. Changes in existingtax laws or rates could affect actual tax results and future business results, which may affect the amount of deferred tax liabilities or the valuation of deferredtax assets over time. Our accounting for deferred tax consequences represents our best estimate of future events.Lennar Homebuilding and Lennar Multifamily OperationsLennar Homebuilding Revenue RecognitionRevenues from sales of homes are recognized when the sales are closed and title passes to the new homeowner, the new homeowner’s initial andcontinuing investment is adequate to demonstrate a commitment to pay for the home, the new homeowner’s receivable is not subject to future subordinationand we do not have a substantial continuing involvement with the new home. Revenues from sales of land are recognized when a significant down paymentis received, the earnings process is complete, title passes and collectability of the receivable is reasonably assured. We believe that the accounting policyrelated to revenue recognition is a critical accounting policy because of the significance of revenue.Lennar Multifamily Revenue RecognitionOur Lennar Multifamily segment provides management services with respect to the development, construction and property management of rentalprojects in joint ventures in which we have investments. As a result, our Lennar Multifamily segment earns and receives fees, which are generally based upona stated percentage of development and construction costs and a percentage of gross rental collections. These fees are included in Lennar Multifamilyrevenue and are recorded over the period in which the services are performed, fees are determinable and collectability is reasonably assured. In addition, ourLennar Multifamily segment provides general contractor services for the construction of some of its rental projects and recognizes the revenue over theperiod in which the services are performed under the percentage of completion method. We believe that the accounting policy related to Lennar Multifamilyrevenue recognition is a critical accounting policy because it represents a significant portion of our Lennar Multifamily's revenues and is expected tocontinue to grow in the future as the segment builds more rental properties.InventoriesInventories are stated at cost unless the inventory within a community is determined to be impaired, in which case the impaired inventory is writtendown to fair value. Inventory costs include land, land development and home construction costs, real estate taxes, deposits on land purchase contracts andinterest related to development and construction. We review our inventory for indicators of impairment by evaluating each community during each reportingperiod. The inventory within each community is categorized as finished homes and construction in progress or land under development based on thedevelopment state of the community. There were 693 and 662 active communities, excluding unconsolidated entities, as of November 30, 2016 and 2015,respectively. If the undiscounted cash flows expected to be generated by a community are less than its carrying amount, an impairment charge is recorded towrite down the carrying amount of such community to its estimated fair value.In conducting our review for indicators of impairment on a community level, we evaluate, among other things, the margins on homes that have beendelivered, margins on homes under sales contracts in backlog, projected margins with regard to future home sales over the life of the community, projectedmargins with regard to future land sales, and the estimated fair57Table of Contentsvalue of the land itself. We pay particular attention to communities in which inventory is moving at a slower than anticipated absorption pace andcommunities whose average sales price and/or margins are trending downward and are anticipated to continue to trend downward. From this review, weidentify communities in which to assess if the carrying values exceed their undiscounted cash flows. Although gross margin percentages for the year endedNovember 30, 2016 have decreased compared to the year ended November 30, 2015 primarily due to an increase in land costs, revenues have increased for allof our homebuilding segments and Homebuilding Other, compared to the year ended November 30, 2015, primarily due to an increase in home deliveries andan increase in the average sales price of homes delivered.We estimate the fair value of our communities using a discounted cash flow model. The projected cash flows for each community are significantlyimpacted by estimates related to market supply and demand, product type by community, homesite sizes, sales pace, sales prices, sales incentives,construction costs, sales and marketing expenses, the local economy, competitive conditions, labor costs, costs of materials and other factors for thatparticular community. Every division evaluates the historical performance of each of its communities as well as current trends in the market and economyimpacting the community and its surrounding areas. These trends are analyzed for each of the estimates listed above.Each of the homebuilding markets in which we operate is unique, as homebuilding has historically been a local business driven by local marketconditions and demographics. Each of our homebuilding markets has specific supply and demand relationships reflective of local economic conditions. Ourprojected cash flows are impacted by many assumptions. Some of the most critical assumptions in our cash flow models are our projected absorption pace forhome sales, sales prices and costs to build and deliver our homes on a community by community basis.In order to arrive at the assumed absorption pace for home sales and the assumed sales prices included in our cash flow model, we analyze ourhistorical absorption pace and historical sales prices in the community and in other comparable communities in the geographical area. In addition, weconsider internal and external market studies and place greater emphasis on more current metrics and trends, which generally include, but are not limited to,statistics and forecasts on population demographics and on sales prices in neighboring communities, unemployment rates and availability and sales price ofcompeting product in the geographical area where the community is located as well as the absorption pace realized in our most recent quarters and the salesprices included in our current backlog for such communities.Generally, if we notice a variation from historical results over a span of two fiscal quarters, we consider such variation to be the establishment of atrend and adjust our historical information accordingly in order to develop assumptions on the projected absorption pace and sales prices in the cash flowmodel for a community.In order to arrive at our assumed costs to build and deliver our homes, we generally assume a cost structure reflecting contracts currently in placewith our vendors adjusted for any anticipated cost reduction initiatives or increases in cost structure. Those costs assumed are used in our cash flow modelsfor our communities.Since the estimates and assumptions included in our cash flow models are based upon historical results and projected trends, they do not anticipateunexpected changes in market conditions or strategies that may lead to us incurring additional impairment charges in the future.Using all the available information, we calculate our best estimate of projected cash flows for each community. While many of the estimates arecalculated based on historical and projected trends, all estimates are subjective and change from market to market and community to community as marketand economic conditions change. The determination of fair value also requires discounting the estimated cash flows at a rate we believe a market participantwould determine to be commensurate with the inherent risks associated with the assets and related estimated cash flow streams. The discount rate used indetermining each asset’s fair value depends on the community’s projected life and development stage. We generally use a discount rate of approximately20%, subject to the perceived risks associated with the community’s cash flow streams relative to its inventory.We estimate the fair value of inventory evaluated for impairment based on market conditions and assumptions made by management at the time theinventory is evaluated, which may differ materially from actual results if market conditions or our assumptions change. For example, changes in marketconditions and other specific developments or changes in assumptions may cause us to re-evaluate our strategy regarding previously impaired inventory, aswell as inventory not currently impaired but for which indicators of impairment may arise if market deterioration occurs, and certain other assets that couldresult in further valuation adjustments and/or additional write-offs of option deposits and pre-acquisition costs due to abandonment of those optionscontracts.We also have access to land inventory through option contracts, which generally enables us to defer acquiring portions of properties owned by thirdparties and unconsolidated entities until we have determined whether to exercise our options. A majority of our option contracts require a non-refundablecash deposit or irrevocable letter of credit based on a percentage of the purchase price of the land. In determining whether to walk-away from an optioncontract, we evaluate the option primarily based upon the expected cash flows from the property under option.58Table of ContentsOur investments in option contracts are recorded at cost unless those investments are determined to be impaired, in which case our investments arewritten down to fair value. We review option contracts for indicators of impairment during each reporting period. The most significant indicator ofimpairment is a decline in the fair value of the optioned property such that the purchase and development of the optioned property would no longer meet ourtargeted return on investment with appropriate consideration given to the length of time available to exercise the option. Such declines could be caused by avariety of factors including increased competition, decreases in demand or changes in local regulations that adversely impact the cost of development.Changes in any of these factors would cause us to re-evaluate the likelihood of exercising its land options.If we intend to walk-away from an option contract, we record a charge to earnings in the period such decision is made for the deposit amount and anyrelated pre-acquisition costs associated with the option contract.We believe that the accounting related to inventory valuation and impairment is a critical accounting policy because: (1) assumptions inherent inthe valuation of our inventory are highly subjective and susceptible to change and (2) the impact of recognizing impairments on our inventory has been andcould continue to be material to our consolidated financial statements. Our evaluation of inventory impairment, as discussed above, includes manyassumptions. The critical assumptions include the timing of the home sales within a community, management’s projections of selling prices and costs and thediscount rate applied to estimate the fair value of the homesites within a community on the balance sheet date. Our assumptions on the timing of home salesare critical because the homebuilding industry has historically been cyclical and sensitive to changes in economic conditions such as interest rates, creditavailability, unemployment levels and consumer sentiment. Changes in these economic conditions could materially affect the projected sales price, costs todevelop the homesites and/or absorption rate in a community. Our assumptions on discount rates are critical because the selection of a discount rate affectsthe estimated fair value of the homesites within a community. A higher discount rate reduces the estimated fair value of the homesites within the community,while a lower discount rate increases the estimated fair value of the homesites within a community. Because of changes in economic and market conditionsand assumptions and estimates required of management in valuing inventory during changing market conditions, actual results could differ materially frommanagement’s assumptions and may require material inventory impairment charges to be recorded in the future.Product WarrantyAlthough we subcontract virtually all aspects of construction to others and our contracts call for the subcontractors to repair or replace any deficientitems related to their trades, we are primarily responsible to homebuyers to correct any deficiencies. Additionally, in some instances, we may be heldresponsible for the actions of or losses incurred by subcontractors. Warranty and similar reserves for homes are established at an amount estimated to beadequate to cover potential costs for materials and labor with regard to warranty-type claims expected to be incurred subsequent to the delivery of a home.Reserves are determined based upon historical data and trends with respect to similar product types and geographical areas. We believe the accountingestimate related to the reserve for warranty costs is a critical accounting estimate because the estimate requires a large degree of judgment.At November 30, 2016, the reserve for warranty costs was $135.4 million, which included $2.1 million of adjustments to pre-existing warranties fromchanges in estimates during the current year primarily related to specific claims related to certain of our homebuilding communities and other adjustments.While we believe that the reserve for warranty costs is adequate, there can be no assurances that historical data and trends will accurately predict our actualwarranty costs. Additionally, there can be no assurances that future economic or financial developments might not lead to a significant change in the reserve.Lennar Homebuilding and Lennar Multifamily Investments in Unconsolidated EntitiesWe strategically invest in unconsolidated entities that acquire and develop land (1) for our homebuilding operations or for sale to third parties,(2) for construction of homes for sale to third-party homebuyers or (3) for the construction and sale of multifamily rental properties. Our LennarHomebuilding partners generally are unrelated homebuilders, land owners/developers and financial or other strategic partners. Our Lennar Multifamilypartners are all financial partners.Most of the unconsolidated entities through which we acquire and develop land are accounted for by the equity method of accounting because weare not the primary beneficiary or a de-facto agent, and we have a significant, but less than controlling, interest in the entities. We record our investments inthese entities in our consolidated balance sheets as "Lennar Homebuilding or Lennar Multifamily Investments in Unconsolidated Entities" and our pro-ratashare of the entities’ earnings or losses in our consolidated statements of operations as "Lennar Homebuilding or Lennar Multifamily Equity in Earnings(Loss) from Unconsolidated Entities," as described in Note 4 and Note 9 of the notes to our consolidated financial statements. For most unconsolidatedentities, we generally have the right to share in earnings and distributions on a pro-rata basis based upon ownership percentages. However, certain LennarHomebuilding unconsolidated entities and all of our Lennar Multifamily unconsolidated entities provide for a different allocation of profit and cashdistributions if and when cumulative results of the59Table of Contentsjoint venture exceed specified targets (such as a specified internal rate of return). Advances to these entities are included in the investment balance.Management looks at specific criteria and uses its judgment when determining if we are the primary beneficiary of, or have a controlling interest in,an unconsolidated entity. Factors considered in determining whether we have significant influence or we have control include risk and reward sharing,experience and financial condition of the other partners, voting rights, involvement in day-to-day capital and operating decisions and continuinginvolvement. The accounting policy relating to the use of the equity method of accounting is a critical accounting policy due to the judgment required indetermining whether we are the primary beneficiary or have control or significant influence.As of November 30, 2016, we believe that the equity method of accounting is appropriate for our investments in unconsolidated entities where weare not the primary beneficiary and we do not have a controlling interest, but rather share control with our partners. At November 30, 2016, the LennarHomebuilding unconsolidated entities in which we had investments had total assets of $5.4 billion and total liabilities of $1.7 billion. At November 30,2016, the Lennar Multifamily unconsolidated entities in which we had investments had total assets of $2.3 billion and total liabilities of $0.8 billion.We evaluate the long-lived assets in unconsolidated entities for indicators of impairment during each reporting period. A series of operating lossesof an investee or other factors may indicate that a decrease in the fair value of our investment in the unconsolidated entity below its carrying amount hasoccurred which is other-than-temporary. The amount of impairment recognized is the excess of the investment’s carrying amount over its estimated fair value.The evaluation of our investment in unconsolidated entities includes certain critical assumptions: (1) projected future distributions from theunconsolidated entities, (2) discount rates applied to the future distributions and (3) various other factors.Our assumptions on the projected future distributions from unconsolidated entities are dependent on market conditions. Specifically, distributionsare dependent on cash to be generated from the sale of inventory by the Lennar Homebuilding unconsolidated entities or operating assets by the LennarMultifamily unconsolidated entities. Such long-lived assets are also reviewed for potential impairment by the unconsolidated entities. The unconsolidatedentities generally also use a discount rate of between 10% and 20% in their reviews for impairment, subject to the perceived risks associated with thecommunity’s cash flow streams relative to its inventory. If a valuation adjustment is recorded by an unconsolidated entity related to its assets, ourproportionate share is reflected in our Lennar Homebuilding or Lennar Multifamily equity in earnings (loss) from unconsolidated entities with acorresponding decrease to our Lennar Homebuilding or Lennar Multifamily investment in unconsolidated entities. We believe our assumptions on theprojected future distributions from the unconsolidated entities are critical because the operating results of the unconsolidated entities from which theprojected distributions are derived are dependent on the status of the homebuilding industry, which has historically been cyclical and sensitive to changes ineconomic conditions such as interest rates, credit availability, unemployment levels and consumer sentiment. Changes in these economic conditions couldmaterially affect the projected operational results of the unconsolidated entities from which the distributions are derived.Additionally, we evaluate if a decrease in the value of an investment below its carrying amount is other than-temporary. This evaluation includescertain critical assumptions made by management and other factors such as age of the venture, intent and ability for us to recover our investment in the entity,financial condition and long-term prospects of the unconsolidated entity, short-term liquidity needs of the unconsolidated entity, trends in the generaleconomic environment of the land, entitlement status of the land held by the unconsolidated entity, overall projected returns on investments, defaults undercontracts with third parties (including bank debt), recoverability of the investment through future cash flows and relationships with the other partners andbanks. If the decline in the fair value of the investment is other-than-temporary, then these losses are included in Lennar Homebuilding other income, net orLennar Multifamily costs and expenses.We believe our assumptions on discount rates are critical accounting policies because the selection of the discount rates affects the estimated fairvalue of our investments in unconsolidated entities. A higher discount rate reduces the estimated fair value of our investments in unconsolidated entities,while a lower discount rate increases the estimated fair value of our investments in unconsolidated entities. Because of changes in economic conditions,actual results could differ materially from management’s assumptions and may require material valuation adjustments to our investments in unconsolidatedentities to be recorded in the future.Consolidation of Variable Interest EntitiesGAAP requires the consolidation of VIEs in which an enterprise has a controlling financial interest. A controlling financial interest will have both ofthe following characteristics: (a) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (b) theobligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially besignificant to the VIE.60Table of ContentsOur variable interest in VIEs may be in the form of (1) equity ownership, (2) contracts to purchase assets, (3) management services and developmentagreements between us and a VIE, (4) loans provided by us to a VIE or other partner and/or (5) guarantees provided by members to banks and other thirdparties. We examine specific criteria and use our judgment when determining if we are the primary beneficiary of a VIE. Factors considered in determiningwhether we are the primary beneficiary include risk and reward sharing, experience and financial condition of other partner(s), voting rights, involvement inday-to-day capital and operating decisions, representation on a VIE’s executive committee, existence of unilateral kick-out rights or voting rights, level ofeconomic disproportionality between us and the other partner(s) and contracts to purchase assets from VIEs.Generally, all major decision making in our joint ventures is shared among all partners. In particular, business plans and budgets are generallyrequired to be unanimously approved by all partners. Usually, management and other fees earned by us are nominal and believed to be at market and there isno significant economic disproportionality between us and other partners. Generally, we purchase less than a majority of the JV’s assets and the purchaseprices under our option contracts are believed to be at market.Generally, our unconsolidated entities become VIEs and consolidate when the other partner(s) lack the intent and financial wherewithal to remain inthe entity. As a result, we continue to fund operations and debt paydowns through partner loans or substituted capital contributions. The accounting policyrelating to variable interest entities is a critical accounting policy because the determination of whether an entity is a VIE and, if so, whether we are primarybeneficiary may require us to exercise significant judgment.Lennar Financial Services OperationsRevenue RecognitionTitle premiums on policies issued directly by us are recognized as revenue on the effective date of the title policies and escrow fees and loanorigination revenues are recognized at the time the related real estate transactions are completed, usually upon the close of escrow. Revenues from titlepolicies issued by independent agents are recognized as revenue when notice of issuance is received from the agent, which is generally when cash payment isreceived by us. Expected gains and losses from the sale of loans and their related servicing rights are included in the measurement of all written loancommitments that are accounted for at fair value through earnings at the time of commitment. Interest income on loans held-for-sale and loans held-for-investment is recognized as earned over the terms of the mortgage loans based on the contractual interest rates. We believe that the accounting policy relatedto revenue recognition is a critical accounting policy because of the significance of revenue.Loan Origination LiabilitiesSubstantially all of the loans our Lennar Financial Services segment originates are sold within a short period in the secondary mortgage market on aservicing released, non-recourse basis. After the loans are sold, we retain potential liability for possible claims by purchasers that we breached certain limitedindustry-standard representations and warranties related to loan sales. Over the last several years there has been an industry-wide effort by purchasers todefray their losses by purporting to have found inaccuracies related to sellers’ representations and warranties in particular loan sale agreements.Our mortgage operations have established reserves for possible losses associated with mortgage loans previously originated and sold to investors.We establish reserves for such possible losses based upon, among other things, an analysis of repurchase requests received, an estimate of potentialrepurchase claims not yet received and actual past repurchases and losses through the disposition of affected loans, as well as previous settlements. While webelieve that we have adequately reserved for known losses and projected repurchase requests, given the volatility in the mortgage industry and theuncertainty regarding the ultimate resolution of these claims, if either actual repurchases or the losses incurred resolving those repurchases exceed ourexpectations, additional recourse expense may be incurred. This allowance requires management’s judgment and estimate. For these reasons, we believe thatthe accounting estimate related to the loan origination losses is a critical accounting estimate.Rialto OperationsManagement Fee RevenueOur Rialto segment provides services to a variety of legal entities and investment vehicles such as funds, joint ventures, co-invests, and other privateequity structures to manage their respective investments. As a result, Rialto earns and receives management fees, underwriting fees and due diligence fees.These fees are included in Rialto revenues and are recorded over the period in which the services are performed, fees are determinable and collectability isreasonably assured. Rialto receives investment management fees from investment vehicles based on 1) a percentage of committed or called capital during thecommitment period and called capital after the commitment period ends and 2) a percentage of invested capital less the portion of such invested capitalutilized to acquire investments that have been sold (in whole or in part) or liquidated. Fees earned for underwriting and due diligence services are based onactual costs incurred. In certain situations, Rialto may earn61Table of Contentsadditional fees when the return on assets managed exceeds contractually established thresholds. Such revenue is only booked when the contract terms aremet, the contract is at, or near, completion and the amounts are known and collectability is reasonably assured. Since such revenue is recognized during thelatter half of the life of the investment vehicle, after substantially all of the assets have been sold and investment gains and losses realized, the possibility ofclaw backs is limited. In addition, Rialto may also receive tax distributions in order to cover income tax obligations resulting from allocations of taxableincome due to Rialto's carried interests in the Funds. These distributions are not subject to clawbacks and therefore are recorded as revenue when received.We believe the way we record Rialto management fee revenue is a significant accounting policy because it represents a significant portion of ourRialto segment's revenues and is expected to continue to grow in the future as the segment manages more assets.Rialto Mortgage Finance - Loans Held-for-SaleThe originated mortgage loans are classified as loans held-for-sale and are recorded at fair value. We elected the fair value option for RMF's loansheld-for-sale in accordance with ASC 825, Financial Instruments, which permits entities to measure various financial instruments and certain other items atfair value on a contract-by-contract basis. Changes in fair values of the loans are reflected in Rialto revenues in the accompanying consolidated statements ofoperations. Interest income on these loans is calculated based on the interest rate of the loan and is recorded in Rialto revenues in the accompanyingconsolidated statements of operations. Substantially all of the mortgage loans originated are sold within a short period of time in securitizations on aservicing released, non-recourse basis; although, we remain liable for certain limited industry-standard representations and warranties related to loan sales.We recognize revenue on the sale of loans into securitization trusts when control of the loans has been relinquished.We believe this is a critical accounting policy due to the significant judgment involved in estimating the fair values of loans held-for-sale during theperiod between when the loans are originated and the time the loans are sold and because of its significance to our Rialto segment.Real Estate OwnedREO represents real estate that our Rialto segment has taken control, or has effective control of, in partial or full satisfaction of loans receivable. Atthe time of acquisition of a property through foreclosure of a loan, REO is recorded at fair value less estimated costs to sell if classified as held-for-sale or atfair value if classified as held-and-used, which becomes the property’s new basis. The fair values of these assets are determined in part by placing reliance onthird-party appraisals of the properties and/or internally prepared analyses of recent offers or prices on comparable properties in the proximate vicinity. Thethird-party appraisals and internally developed analyses are significantly impacted by the local market economy, market supply and demand, competitiveconditions and prices on comparable properties, adjusted for anticipated date of sale, location, property size, and other factors. Each REO is unique and isanalyzed in the context of the particular market where the property is located. In order to establish the significant assumptions for a particular REO, weanalyze historical trends, including trends achieved by our local homebuilding operations, if applicable, and current trends in the market and economyimpacting the REO. Using available trend information, we then calculate our best estimate of fair value, which can include projected cash flows discounted ata rate we believe a market participant would determine to be commensurate with the inherent risks associated with the assets and related estimated cash flowstreams.Changes in economic factors, consumer demand and market conditions, among other things, could materially impact estimates used in the third-party appraisals and/or internally prepared analyses of recent offers or prices on comparable properties. Thus, estimates can differ significantly from theamounts ultimately realized by our Rialto segment from disposition of these assets. The amount by which the recorded investment in the loan is less than theREO’s fair value (net of estimated cost to sell if held-for-sale), is recorded as an unrealized gain on foreclosure in our consolidated statement of operations.The amount by which the recorded investment in the loan is greater than the REO’s fair value (net of estimated cost to sell if held-for-sale) is recorded as aprovision for loan losses in our consolidated statement of operations.Subsequent to obtaining REO via foreclosure or directly from a financial institution, management periodically performs valuations using themethodologies described above such that the real estate is carried at the lower of its carrying value or current fair value, less estimated costs to sell ifclassified as held-for-sale. Held-and-used assets are tested for recoverability whenever changes in circumstances indicate that the carrying value may not berecoverable, and impairment losses are recorded for any amount by which the carrying value exceeds its fair value. Any subsequent impairment losses,operating expenses or income, and gains and losses on disposition of such properties are also recognized in Rialto other income (expense), net. REO assetsclassified as held-and-used are depreciated using a useful life of forty years for commercial properties and twenty seven and a half years for residentialproperties. REO assets classified as held-for-sale are not depreciated. Occasionally, an asset will require certain improvements to yield a higher return.Construction costs incurred prior to acquisition or during development of the asset may be capitalized.62Table of ContentsWe believe that the accounting related to REO is a critical accounting policy because of the significant judgment required in the third-partyappraisals and/or internally prepared analyses of recent offers or prices of comparable properties in the proximate vicinity used to estimate the fair value ofREOs.Consolidations of Variable Interest EntitiesIn 2010, our Rialto segment acquired indirectly 40% managing member equity interests in two LLCs, in partnership with the FDIC. We determinedthat each of the LLCs met the definition of a VIE and we were the primary beneficiary. In accordance with ASC 810-10-65-2, Consolidations, ("ASC 810-10-65-2"), we identified the activities that most significantly impact the LLCs’ economic performance and determined that we have the power to direct thoseactivities. The economic performance of the LLCs is most significantly impacted by the performance of the LLCs’ portfolios of assets, which consistprimarily of distressed residential and commercial mortgage loans. Thus, the activities that most significantly impact the LLCs’ economic performance arethe servicing and disposition of mortgage loans and real estate obtained through foreclosure of loans, restructuring of loans, or other planned activitiesassociated with the monetizing of loans.The FDIC does not have the unilateral power to terminate our role in managing the LLCs and servicing the loan portfolios. While the FDIC has theright to prevent certain types of transactions (i.e., bulk sales, selling assets with recourse back to the selling entity, selling assets with representations andwarranties and financing the sales of assets without the FDIC’s approval), the FDIC does not have full voting or blocking rights over the LLCs’ activities,making their voting rights protective in nature, not substantive participating voting rights. Other than as described in the preceding sentence, which are notthe primary activities of the LLCs, we can cause the LLCs to enter into both the disposition and restructuring of loans without any involvement of the FDIC.Additionally, the FDIC has no voting rights with regard to the operation/management of the operating properties that are acquired upon foreclosure of loans(e.g. REO) and no voting rights over the business plans of the LLCs. The FDIC can make suggestions regarding the business plans, but we can decide not tofollow the FDIC’s suggestions and not to incorporate them in the business plans. Since the FDIC’s voting rights are protective in nature and not substantiveparticipating voting rights, we have the power to direct the activities that most significantly impact the LLCs’ economic performance.In accordance with ASC 810-10-65-2, we determined that we had an obligation to absorb losses of the LLCs that could potentially be significant tothe LLCs or the right to receive benefits from the LLCs that could potentially be significant to the LLCs based on the following factors:•Rialto/Lennar owns 40% of the equity of the LLCs and has the power to direct the activities of the LLCs that most significantly impact theireconomic performance through loan resolutions and the sale of REO.•Rialto/Lennar has a management/servicer contract under which we earn a 0.5% servicing fee.•Rialto/Lennar has guaranteed, as the servicer, its obligations under the servicing agreement up to $10 million.We are aware that the FDIC, as the owner of 60% of the equity of each of the LLCs, may also have an obligation to absorb losses of the LLCs thatcould potentially be significant to the LLCs. However, in accordance with ASC 810-10-25-38A, only one enterprise, if any, is expected to be identified as theprimary beneficiary of a VIE.Since both criteria for consolidation in ASC 810-10-65-2 are met, we consolidated the LLCs. We believe that our assessment that we are the primarybeneficiary of the LLCs is a critical accounting policy because of the significant judgment required in evaluating all of the key factors and circumstances indetermining the primary beneficiary.Item 7A.Quantitative and Qualitative Disclosures About Market Risk.We are exposed to a number of market risks in the ordinary course of business. Our primary market risk exposure relates to fluctuations in interestrates on our investments, loans held-for-sale, loans held-for-investment and outstanding variable rate debt.For fixed rate debt, such as our senior notes, changes in interest rates generally affect the fair value of the debt instrument, but not our earnings orcash flows. For variable debt such as our unsecured revolving credit facility and Lennar Financial Services’ and Rialto’s warehouse repurchase facilities,changes in interest rates generally do not affect the fair value of the outstanding borrowings on the debt facilities, but do affect our earnings and cash flows.In our Lennar Financial Services operations, we utilize mortgage backed securities forward commitments, option contracts and investorcommitments to protect the value of fixed rate-locked commitments and loans held-for-sale from fluctuations in mortgage-related interest rates.To mitigate interest risk associated with Rialto’s loans held-for-sale, we use derivative financial instruments to hedge our exposure to risk from thetime a borrower locks a loan until the time the loan is securitized. We hedge our interest rate exposure through entering into interest rate swap futures. Wealso manage a portion of our credit exposure by buying protection within the CMBX and CDX markets.We do not enter into or hold derivatives for trading or speculative purposes.63Table of ContentsThe table below provides information at November 30, 2016 about our significant instruments that are sensitive to changes in interest rates. Forloans held-for-investment, net and investments held-to-maturity, senior notes and other debts payable and notes and other debts payable, the table presentsprincipal cash flows and related weighted average effective interest rates by expected maturity dates and estimated fair values at November 30, 2016.Weighted average variable interest rates are based on the variable interest rates at November 30, 2016.Rialto’s loans receivable, net, is comprised of nonaccrual and accrual loans. Only the accrual loans are included in the table below, as we believethat since the nonaccrual loans were acquired having deteriorated credit quality, they are not sensitive to changes in interest rates.See Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 and Notes 1 and 14 of the notes to theconsolidated financial statements in Item 8 for a further discussion of these items and our strategy of mitigating our interest rate risk.Information Regarding Interest Rate SensitivityPrincipal (Notional) Amount byExpected Maturity and Average Interest RateNovember 30, 2016 Years Ending November 30, Fair Value atNovember 30,(Dollars in millions)2017 2018 2019 2020 2021 Thereafter Total 2016ASSETS Rialto: Loans receivable, net: Accrual loans: Fixed rate$— — — — — 1.4 1.4 1.4Average interest rate— — — — — 5.0% 5.0% —Variable rate$30.3 32.8 — — — — 63.1 63.1Average interest rate6.6% 5.6% — — — — 6.1% —Investments held-to-maturity: Fixed rate$— — — 20.3 — 51.0 71.3 70.0Average interest rate— — — 4.0% — 2.7% 3.3% —Lennar Financial Services: Loans held-for-investment, net andinvestments held-to-maturity: Fixed rate$34.7 6.6 3.3 1.1 1.4 21.9 69.0 70.0Average interest rate1.8% 2.8% 3.3% 5.0% 5.3% 4.6% 3.0% —Variable rate$0.1 0.1 0.1 0.1 0.1 2.5 3.0 3.3Average interest rate3.8% 3.8% 3.8% 3.8% 3.8% 3.8% 3.8% —LIABILITIES Lennar Homebuilding: Senior notes and other debts payable: Fixed rate$435.0 682.6 1,380.0 3.8 508.2 1,525.0 4,534.6 4,626.4Average interest rate11.5% 5.4% 4.4% 3.9% 4.8% 4.8% 5.4% —Variable rate$43.3 12.6 3.1 0.6 11.1 — 70.7 72.6Average interest rate3.4% 3.7% 3.8% 2.6% 2.6% — 3.3% —Rialto: Notes and other debts payable: Fixed rate$30.4 1.2 351.0 — — — 382.6 425.2Average interest rate6.8% 7.0% 7.0% — — — 6.9% —Variable rate$218.8 23.3 — — — — 242.1 223.5Average interest rate2.8% 2.8% — — — — 2.8% —Lennar Financial Services: Notes and other debts payable: Variable rate$1,077.0 0.1 0.1 — — — 1,077.2 1,077.2Average interest rate2.9% 4.0% 4.0% — — — 2.9% —64Table of ContentsItem 8.Financial Statements and Supplementary Data.REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders of Lennar CorporationWe have audited the accompanying consolidated balance sheets of Lennar Corporation and subsidiaries (the "Company") as of November 30, 2016and 2015, and the related consolidated statements of operations and comprehensive income (loss), equity, and cash flows for each of the three years in theperiod ended November 30, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe thatour audits provide a reasonable basis for our opinion.In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Lennar Corporation andsubsidiaries as of November 30, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period endedNovember 30, 2016, in conformity with accounting principles generally accepted in the United States of America.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internalcontrol over financial reporting as of November 30, 2016, based on the criteria established in Internal Control — Integrated Framework (2013) issued by theCommittee of Sponsoring Organizations of the Treadway Commission and our report dated January 20, 2017 expressed an unqualified opinion on theCompany’s internal control over financial reporting./s/ DELOITTE & TOUCHE LLPCertified Public AccountantsMiami, FloridaJanuary 20, 201765Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSNovember 30, 2016 and 2015 2016 (1) 2015 (1) (Dollars in thousands, except shares and pershare amounts)ASSETS Lennar Homebuilding: Cash and cash equivalents$1,050,138 893,408Restricted cash5,977 13,505Receivables, net106,976 74,538Inventories: Finished homes and construction in progress3,951,716 3,957,167Land and land under development5,106,191 4,724,578Consolidated inventory not owned121,019 58,851Total inventories9,178,926 8,740,596Investments in unconsolidated entities811,723 741,551Other assets651,028 609,222 11,804,768 11,072,820Rialto1,276,210 1,505,500Lennar Financial Services1,754,672 1,425,837Lennar Multifamily526,131 415,352Total assets$15,361,781 14,419,509(1)Under certain provisions of Accounting Standards Codification ("ASC") Topic 810, Consolidations, ("ASC 810") the Company is required to separately disclose on itsconsolidated balance sheets the assets of consolidated variable interest entities ("VIEs") that are owned by the consolidated VIEs and liabilities of consolidated VIEs as towhich there is no recourse against the Company.As of November 30, 2016, total assets include $536.3 million related to consolidated VIEs of which $13.3 million is included in Lennar Homebuilding cash and cashequivalents, $0.2 million in Lennar Homebuilding receivables, net, $54.2 million in Lennar Homebuilding finished homes and construction in progress, $106.3 million inLennar Homebuilding land and land under development, $121.0 million in Lennar Homebuilding consolidated inventory not owned, $4.6 million in Lennar Homebuildinginvestments in unconsolidated entities, $13.9 million in Lennar Homebuilding other assets, $213.8 million in Rialto assets and $8.8 million in Lennar Multifamily assets.As of November 30, 2015, total assets include $652.3 million related to consolidated VIEs of which $9.6 million is included in Lennar Homebuilding cash and cashequivalents, $0.5 million in Lennar Homebuilding receivables, net, $3.9 million in Lennar Homebuilding finished homes and construction in progress, $154.2 million inLennar Homebuilding land and land under development, $58.9 million in Lennar Homebuilding consolidated inventory not owned, $35.8 million in Lennar Homebuildinginvestments in unconsolidated entities, $22.7 million in Lennar Homebuilding other assets, $355.2 million in Rialto assets and $11.5 million in Lennar Multifamily assets.See accompanying notes to consolidated financial statements.66Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSNovember 30, 2016 and 2015 2016 (2) 2015 (2) (Dollars in thousands, except shares and pershare amounts)LIABILITIES AND EQUITY Lennar Homebuilding: Accounts payable$478,546 475,909Liabilities related to consolidated inventory not owned110,006 51,431Senior notes and other debts payable4,575,977 5,025,130Other liabilities841,449 899,815 6,005,978 6,452,285Rialto707,980 866,224Lennar Financial Services1,318,283 1,083,978Lennar Multifamily117,973 66,950Total liabilities8,150,214 8,469,437Stockholders’ equity: Preferred stock— —Class A common stock of $0.10 par value per share; Authorized: 2016 and 2015 - 300,000,000 shares; Issued:2016 - 204,089,447 shares; 2015 - 180,658,550 shares20,409 18,066Class B common stock of $0.10 par value per share; Authorized: 2016 and 2015 - 90,000,000 shares, Issued:2016 - 32,982,815 shares; 2015 - 32,982,815 shares3,298 3,298Additional paid-in capital2,805,349 2,305,560Retained earnings4,306,256 3,429,736Treasury stock, at cost; 2016 - 917,449 shares of Class A common stock and 1,679,620 shares of Class B commonstock; 2015 - 815,959 shares of Class A common stock and 1,679,620 shares of Class B common stock(108,961) (107,755)Accumulated other comprehensive income (loss)(309) 39Total stockholders’ equity7,026,042 5,648,944Noncontrolling interests185,525 301,128Total equity7,211,567 5,950,072Total liabilities and equity$15,361,781 14,419,509(2)As of November 30, 2016, total liabilities include $126.4 million related to consolidated VIEs as to which there was no recourse against the Company, of which $3.6 million isincluded in Lennar Homebuilding accounts payable, $110.0 million in Lennar Homebuilding liabilities related to consolidated inventory not owned, $2.5 million in LennarHomebuilding other liabilities and $10.3 million in Rialto liabilities.As of November 30, 2015, total liabilities include $84.4 million related to consolidated VIEs as to which there was no recourse against the Company, of which $2.0 million isincluded in Lennar Homebuilding accounts payable, $51.4 million in Lennar Homebuilding liabilities related to consolidated inventory not owned, $15.6 million in LennarHomebuilding other liabilities, $11.3 million in Rialto liabilities and $4.0 million in Lennar Multifamily liabilities.See accompanying notes to consolidated financial statements.67Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)Years Ended November 30, 2016, 2015 and 2014 2016 2015 2014 (Dollars in thousands, except per share amounts)Revenues: Lennar Homebuilding$9,741,337 8,466,945 7,025,130Lennar Financial Services687,255 620,527 454,381Rialto233,966 221,923 230,521Lennar Multifamily287,441 164,613 69,780Total revenues10,949,999 9,474,008 7,779,812Cost and expenses: Lennar Homebuilding8,399,881 7,264,839 5,962,029Lennar Financial Services523,638 492,732 374,243Rialto229,769 222,875 249,114Lennar Multifamily301,786 191,302 95,227Corporate general and administrative232,562 216,244 177,161Total costs and expenses9,687,636 8,387,992 6,857,774Lennar Homebuilding equity in earnings (loss) from unconsolidated entities(49,275) 63,373 (355)Lennar Homebuilding other income, net57,377 18,616 7,526Other interest expense(4,626) (12,454) (36,551)Rialto equity in earnings from unconsolidated entities18,961 22,293 59,277Rialto other income (expense), net(39,850) 12,254 3,395Lennar Multifamily equity in earnings from unconsolidated entities85,519 19,518 14,454Earnings before income taxes1,330,469 1,209,616 969,784Provision for income taxes(417,378) (390,416) (341,091)Net earnings (including net earnings (loss) attributable to noncontrolling interests)913,091 819,200 628,693Less: Net earnings (loss) attributable to noncontrolling interests1,247 16,306 (10,223)Net earnings attributable to Lennar$911,844 802,894 638,916Other comprehensive income, net of tax: Net unrealized gain (loss) on securities available-for-sale(295) (65) 130Reclassification adjustments for gains included in net earnings(53) (26) —Other comprehensive income attributable to Lennar$911,496 802,803 639,046Other comprehensive income (loss) attributable to noncontrolling interests$1,247 16,306 (10,223)Basic earnings per share$4.13 3.87 3.12Diluted earnings per share$3.93 3.46 2.80See accompanying notes to consolidated financial statements.68Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF EQUITYYears Ended November 30, 2016, 2015 and 2014 2016 2015 2014 (Dollars in thousands, except per share amounts)Class A common stock: Beginning balance$18,066 17,424 18,483Employee stock and director plans124 122 114Retirement of treasury stock— — (1,173)Conversion of convertible senior notes to shares of Class A common stock2,219 520 —Balance at November 30,20,409 18,066 17,424Class B common stock - Balance at November 30,3,298 3,298 3,298Additional paid-in capital: Beginning balance2,305,560 2,239,574 2,721,246Employee stock and director plans1,487 1,451 1,384Retirement of treasury stock— — (541,019)Tax benefit from employee stock plans, vesting of restricted stock and conversion ofconvertible senior notes45,803 21,313 17,382Amortization of restricted stock55,516 43,742 40,581Conversion of convertible senior notes to shares of Class A common stock396,983 (520) —Balance at November 30,2,805,349 2,305,560 2,239,574Retained earnings: Beginning balance3,429,736 2,660,034 2,053,893Net earnings attributable to Lennar911,844 802,894 638,916Cash dividends - Class A common stock ($0.16 per share)(30,315) (28,183) (27,766)Cash dividends - Class B common stock ($0.16 per share)(5,009) (5,009) (5,009)Balance at November 30,4,306,256 3,429,736 2,660,034Treasury stock, at cost: Beginning balance(107,755) (93,440) (628,019)Employee stock and directors plans(1,206) (14,315) (7,613)Retirement of treasury stock— — 542,192Balance at November 30,(108,961) (107,755) (93,440)Accumulated comprehensive other income (loss): Beginning balance39 130 —Other comprehensive income (loss), net of tax(348) (91) 130Balance at November 30,(309) 39 130Total stockholders’ equity7,026,042 5,648,944 4,827,020Noncontrolling interests: Beginning balance301,128 424,282 458,569Net earnings (loss) attributable to noncontrolling interests1,247 16,306 (10,223)Receipts related to noncontrolling interests353 1,296 12,859Payments related to noncontrolling interests(127,410) (133,374) (155,625)Non-cash distributions to noncontrolling interests(5,033) — —Non-cash consolidations (deconsolidations), net12,478 (13,253) 118,272Non-cash purchase or activity of noncontrolling interests2,762 5,871 430Balance at November 30,185,525 301,128 424,282Total equity$7,211,567 5,950,072 5,251,302See accompanying notes to consolidated financial statements.69Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSYears Ended November 30, 2016, 2015 and 2014 2016 2015 2014 (In thousands)Cash flows from operating activities: Net earnings (including net earnings (loss) attributable to noncontrolling interests)$913,091 819,200 628,693Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization50,219 43,666 38,542Amortization of discount/premium on debt, net14,619 19,874 21,387Equity in earnings from unconsolidated entities(55,205) (105,184) (73,376)Distributions of earnings from unconsolidated entities101,965 60,753 22,251Share-based compensation expense55,516 43,873 40,718Excess tax benefits from share-based awards(7,039) (113) (7,497)Deferred income tax expense (benefit)97,485 (5,637) 75,324Loss (gain) on retirement of debt and notes payable1,569 3,632 (4,555)Gain on sale of operating properties and equipment(14,457) (5,945) —Unrealized and realized gains on real estate owned(21,380) (36,380) (36,901)Impairments of loans receivable and real estate owned45,201 25,179 76,450Valuation adjustments and write-offs of option deposits and pre-acquisition costs, other receivables and other assets11,283 31,002 13,088Changes in assets and liabilities: Decrease (increase) in restricted cash9,716 20,876 (18,930)Increase in receivables(260,844) (86,432) (113,001)Increase in inventories, excluding valuation adjustments and write-offs of option deposits and pre-acquisitioncosts(503,527) (1,126,907) (1,367,415)Increase in other assets(41,933) (28,154) (13,990)Decrease (increase) in loans held-for-sale90,093 (318,739) (395,363)Increase in accounts payable and other liabilities21,432 225,790 326,087Net cash provided by (used in) operating activities507,804 (419,646) (788,488)Cash flows from investing activities: Increase in restricted cash related to LOCs— 2,030 37Net additions to operating properties and equipment(76,439) (91,355) (22,599)Proceeds from the sale of operating properties and equipment25,288 73,732 43,937Investments in and contributions to unconsolidated entities(425,761) (314,937) (159,783)Distributions of capital from unconsolidated entities323,190 218,996 279,306Proceeds from sales of real estate owned97,871 155,295 269,698Improvements to real estate owned(1,906) (8,477) (14,278)Receipts of principal payments on loans receivable and other84,433 28,389 24,019Purchases of loans receivable and real estate owned(548) (3,228) —Originations of loans receivable(56,507) (78,703) (7,000)Purchase of investment carried at cost— (18,000) —Purchases of commercial mortgage-backed securities bond(42,436) (13,973) (8,705)Proceeds from sale of commercial mortgage-backed securities bond— 7,014 9,171Acquisitions, net of cash acquired(725) — (5,489)Purchases of Lennar Homebuilding investments available-for-sale— (28,093) (21,274)Proceeds from sales of Lennar Homebuilding investments available-for-sale541 — 51,934Decrease (increase) in Lennar Financial Services held-for-investment, net963 (5,022) 1,102Purchases of Lennar Financial Services investment securities(37,764) (45,687) (40,627)Proceeds from maturities/sales of Lennar Financial Services investment securities23,963 23,626 38,910Net cash (used in) provided by investing activities$(85,837) (98,393) 438,359 Cash flows from financing activities: Net borrowings under warehouse facilities$107,465 366,290 389,535Proceeds from senior notes499,024 1,146,647 955,025Debt issuance costs(4,740) (11,807) (9,989)Redemption of senior notes(250,000) (500,000) (250,000)Conversions and exchanges on convertible senior notes(234,028) (212,107) —Proceeds from Rialto structured notes— — 94,444Principal payments on Rialto notes payable including structured notes(39,026) (58,923) (75,879)Proceeds from other borrowings37,163 101,618 34,424Principal payments on other borrowings(210,968) (258,108) (299,713)Exercise of land option contracts from an unconsolidated land investment venture— — (1,540)Receipts related to noncontrolling interests353 1,296 12,859Payments related to noncontrolling interests(127,410) (133,374) (155,625)Excess tax benefits from share-based awards7,039 113 7,497Common stock: Issuances19,471 9,405 13,599Repurchases(19,902) (23,188) (20,424)Dividends(35,324) (33,192) (32,775)Net cash (used in) provided by financing activities(250,883) 394,670 661,438Net increase (decrease) in cash and cash equivalents171,084 (123,369) 311,309Cash and cash equivalents at beginning of year1,158,445 1,281,814 970,505Cash and cash equivalents at end of year$1,329,529 1,158,445 1,281,814Summary of cash and cash equivalents: Lennar Homebuilding$1,050,138 893,408 885,729Rialto148,827 150,219 303,889Lennar Financial Services123,964 106,777 90,010Lennar Multifamily6,600 8,041 2,186 $1,329,529 1,158,445 1,281,814Supplemental disclosures of cash flow information: Cash paid for interest, net of amounts capitalized$66,570 87,132 68,366Cash paid for income taxes, net$374,731 336,796 202,374 Supplemental disclosures of non-cash investing and financing activities: Lennar Homebuilding and Lennar Multifamily: Purchases of inventories, land under development and other assets financed by sellers$101,504 66,819 129,881Net non-cash contributions to unconsolidated entities$107,935 205,327 106,132Conversion of convertible senior notes to equity$399,206 — —Inventory acquired in satisfaction of other assets including investments available-for-sale$— 28,093 —Inventory acquired in partner buyout$— 64,440 —Non-cash sale of operating properties and equipment$— (59,397) —Rialto: Real estate owned acquired in satisfaction/partial satisfaction of loans receivable$8,476 17,248 57,390Non-cash acquisition of Servicer Provider$— — 8,317Lennar Financial Services: Purchase of mortgage servicing rights financed by seller$— — 5,697Consolidation/deconsolidation of unconsolidated/consolidated entities, net: Inventories$111,347 — 155,021Operating properties and equipment and other assets$— (17,421) (7,218)Investments in unconsolidated entities$(2,445) 2,948 (30,647)Liabilities related to consolidated inventory not owned$(96,424) — —Other liabilities$— 1,220 —Noncontrolling interests$(12,478) 13,253 (117,156)See accompanying notes to consolidated financial statements.70Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. Summary of Significant Accounting PoliciesBasis of ConsolidationThe accompanying consolidated financial statements include the accounts of Lennar Corporation and all subsidiaries, partnerships and otherentities in which Lennar Corporation has a controlling interest and VIEs (see Note 15) in which Lennar Corporation is deemed the primary beneficiary (the"Company"). The Company’s investments in both unconsolidated entities in which a significant, but less than controlling, interest is held and in VIEs inwhich the Company is not deemed to be the primary beneficiary are accounted for by the equity method. All intercompany transactions and balances havebeen eliminated in consolidation.Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP")requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.Actual results could differ from those estimates.Revenue RecognitionRevenues from sales of homes are recognized when the sales are closed and title passes to the new homeowner, the new homeowner’s initial andcontinuing investment is adequate to demonstrate a commitment to pay for the home, the new homeowner’s receivable is not subject to future subordinationand the Company does not have a substantial continuing involvement with the new home. Revenues from sales of land are recognized when a significantdown payment is received, the earnings process is complete, title passes and collectability of the receivable is reasonably assured. See Lennar FinancialServices, Rialto and Lennar Multifamily within this Note for disclosure of other revenue recognition policies related to those segments.Advertising CostsThe Company expenses advertising costs as incurred. Advertising costs were $40.9 million, $47.9 million and $45.2 million for the years endedNovember 30, 2016, 2015 and 2014, respectively.Share-Based PaymentsThe Company has share-based awards outstanding under the 2007 Equity Incentive Plan and the 2016 Equity Incentive Plan (the "Plans"), each ofwhich provides for the granting of stock options, stock appreciation rights, restricted common stock ("nonvested shares") and other share based awards toofficers, associates and directors. The exercise prices of stock options may not be less than the market value of the common stock on the date of the grant.Exercises are permitted in installments determined when options are granted. Each stock option will expire on a date determined at the time of the grant, butnot more than ten years after the date of the grant. The Company accounts for stock option awards and nonvested share awards granted under the Plans basedon the estimated grant date fair value.Cash and Cash EquivalentsThe Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Due to theshort maturity period of cash equivalents, the carrying amounts of these instruments approximate their fair values. Cash and cash equivalents as ofNovember 30, 2016 and 2015 included $460.5 million and $414.9 million, respectively, of cash held in escrow for approximately 3 days.Restricted CashLennar Homebuilding restricted cash consists of customer deposits on home sales held in restricted accounts until title transfers to the homebuyer, asrequired by the state and local governments in which the homes were sold, as well as funds on deposit to secure and support performance obligations. Rialtorestricted cash primarily consists of upfront deposits and application fees Rialto Mortgage Finance ("RMF") receives before originating loans and isrecognized as income once the loan has been originated as well as cash held in escrow by the Company’s loan servicer provider on behalf of customers andlenders and is disbursed in accordance with agreements between the transacting parties.71Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)InventoriesFinished homes and construction in progress are included within inventories. Inventories are stated at cost unless the inventory within a communityis determined to be impaired, in which case the impaired inventory is written down to fair value. Inventory costs include land, land development and homeconstruction costs, real estate taxes, deposits on land purchase contracts and interest related to development and construction. Construction overhead andselling expenses are expensed as incurred. Homes held-for-sale are classified as inventories until delivered. Land, land development, amenities and othercosts are accumulated by specific area and allocated to homes within the respective areas.The Company reviews its inventory for indicators of impairment by evaluating each community during each reporting period. The inventory withineach community is categorized as finished homes and construction in progress or land under development based on the development state of the community.There were 693 and 662 active communities, excluding unconsolidated entities, as of November 30, 2016 and 2015, respectively. If the undiscounted cashflows expected to be generated by a community are less than its carrying amount, an impairment charge is recorded to write down the carrying amount ofsuch community to its estimated fair value.In conducting its review for indicators of impairment on a community level, the Company evaluates, among other things, the margins on homes thathave been delivered, margins on homes under sales contracts in backlog, projected margins with regard to future home sales over the life of the community,projected margins with regard to future land sales and the estimated fair value of the land itself. The Company pays particular attention to communities inwhich inventory is moving at a slower than anticipated absorption pace and communities whose average sales price and/or margins are trending downwardand are anticipated to continue to trend downward. From this review, the Company identifies communities in which to assess if the carrying values exceedtheir undiscounted projected cash flows.The Company estimates the fair value of its communities using a discounted cash flow model. The projected cash flows for each community aresignificantly impacted by estimates related to market supply and demand, product type by community, homesite sizes, sales pace, sales prices, salesincentives, construction costs, sales and marketing expenses, the local economy, competitive conditions, labor costs, costs of materials and other factors forthat particular community. Every division evaluates the historical performance of each of its communities as well as current trends in the market andeconomy impacting the community and its surrounding areas. These trends are analyzed for each of the estimates listed above.Each of the homebuilding markets in which the Company operates is unique, as homebuilding has historically been a local business driven by localmarket conditions and demographics. Each of the Company’s homebuilding markets has specific supply and demand relationships reflective of localeconomic conditions. The Company’s projected cash flows are impacted by many assumptions. Some of the most critical assumptions in the Company’s cashflow model are projected absorption pace for home sales, sales prices and costs to build and deliver homes on a community by community basis.In order to arrive at the assumed absorption pace for home sales and the assumed sales prices included in the Company’s cash flow model, theCompany analyzes its historical absorption pace and historical sales prices in the community and in other comparable communities in the geographical area.In addition, the Company considers internal and external market studies and places greater emphasis on more current metrics and trends, which generallyinclude, but are not limited to, statistics and forecasts on population demographics and on sales prices in neighboring communities, unemployment rates andavailability and sales prices of competing product in the geographical area where the community is located as well as the absorption pace realized in its mostrecent quarters and the sales prices included in the Company's current backlog for such communities.Generally, if the Company notices a variation from historical results over a span of two fiscal quarters, the Company considers such variation to bethe establishment of a trend and adjusts its historical information accordingly in order to develop assumptions on the projected absorption pace and salesprices in the cash flow model for a community.In order to arrive at the Company’s assumed costs to build and deliver homes, the Company generally assumes a cost structure reflecting contractscurrently in place with its vendors adjusted for any anticipated cost reduction initiatives or increases in cost structure. Those costs assumed are used in thecash flow model for the Company’s communities.Since the estimates and assumptions included in the Company’s cash flow models are based upon historical results and projected trends, they do notanticipate unexpected changes in market conditions or strategies that may lead the Company to incur additional impairment charges in the future.72Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)The determination of fair value requires discounting the estimated cash flows at a rate the Company believes a market participant would determineto be commensurate with the inherent risks associated with the assets and related estimated cash flow streams. The discount rate used in determining eachasset’s fair value depends on the community’s projected life and development stage. The Company generally uses a discount rate of approximately 20%,subject to the perceived risks associated with the community’s cash flow streams relative to its inventory.The Company estimates the fair value of inventory evaluated for impairment based on market conditions and assumptions made by management atthe time the inventory is evaluated, which may differ materially from actual results if market conditions or assumptions change. For example, changes inmarket conditions and other specific developments or changes in assumptions may cause the Company to re-evaluate its strategy regarding previouslyimpaired inventory, as well as inventory not currently impaired but for which indicators of impairment may arise if market deterioration occurs, and certainother assets that could result in further valuation adjustments and/or additional write-offs of option deposits and pre-acquisition costs due to abandonment ofthose options contracts.As of November 30, 2016, the Company reviewed its communities for potential indicators of impairments and identified 11 homebuildingcommunities with 663 homesites and a carrying value of $180.9 million as having potential indicators of impairment. For the year ended November 30,2016, the Company recorded no valuation adjustments.As of November 30, 2015, the Company reviewed its communities for potential indicators of impairments and identified 13 homebuildingcommunities with 931 homesites and a carrying value of $121.7 million as having potential indicators of impairment. Of those communities, the Companyrecorded valuation adjustments of $8.1 million on 209 homesites in five communities with a carrying value of $19.4 million.The table below summarizes the most significant unobservable inputs used in the Company's discounted cash flow model to determine the fair valueof its communities for which the Company recorded valuation adjustments during the years ended November 30, 2015 and 2014: Years ended November 30, 2015 2014Unobservable inputsRange Average selling price$158,000-$1,300,000 $164,000Absorption rate per quarter (homes)3-16 12Discount rate12%-20% 20%The Company also has access to land inventory through option contracts, which generally enables the Company to defer acquiring portions ofproperties owned by third parties and unconsolidated entities until it has determined whether to exercise its option.A majority of the Company’s option contracts require a non-refundable cash deposit or irrevocable letter of credit based on a percentage of thepurchase price of the land. The Company’s option contracts sometimes include price adjustment provisions, which adjust the purchase price of the land to itsapproximate fair value at the time of acquisition or are based on the fair value at the time of takedown.In determining whether to walk away from an option contract, the Company evaluates the option primarily based upon its expected cash flows fromthe property under option. If the Company intends to walk away from an option contract, it records a charge to earnings in the period such decision is madefor the deposit amount and any related pre-acquisition costs associated with the option contract.Some option contracts contain a predetermined take-down schedule for the optioned land parcels. However, in almost all instances, the Company isnot required to purchase land in accordance with those take-down schedules. In substantially all instances, the Company has the right and ability to notexercise its option and forfeit its deposit without further penalty, other than termination of the option and loss of any unapplied portion of its deposit and pre-acquisition costs. Therefore, in substantially all instances, the Company does not consider the take-down price to be a firm contractual obligation. When theCompany does not intend to exercise an option, it writes off any unapplied deposit and pre-acquisition costs associated with the option contract.73Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Lennar Homebuilding and Lennar Multifamily Investments in Unconsolidated EntitiesThe Company evaluates the long-lived assets in unconsolidated entities for indicators of impairment during each reporting period. If a valuationadjustment is recorded by an unconsolidated entity related to its assets, the Company generally uses a discount rate between 10% and 20%, subject to theperceived risks associated with the community’s cash flow streams relative to its inventory or operating assets. The Company’s proportionate share of avaluation adjustment is reflected in the Company's Lennar Homebuilding or Lennar Multifamily equity in earnings (loss) from unconsolidated entities with acorresponding decrease to its Lennar Homebuilding or Lennar Multifamily investment in unconsolidated entities.Additionally, the Company evaluates if a decrease in the value of an investment below its carrying value is other-than-temporary. This evaluationincludes certain critical assumptions made by management: (1) projected future distributions from the unconsolidated entities, (2) discount rates applied tothe future distributions and (3) various other factors, which include age of the venture, relationships with the other partners and banks, general economicmarket conditions, land status and liquidity needs of the unconsolidated entity. If the decline in the fair value of the investment is other-than-temporary, thenthese losses are included in Lennar Homebuilding other income, net or Lennar Multifamily costs and expenses.The Company tracks its share of cumulative earnings and distributions of its joint ventures ("JVs"). For purposes of classifying distributions receivedfrom JVs in the Company’s consolidated statements of cash flows, cumulative distributions are treated as returns on capital to the extent of cumulativeearnings and included in the Company’s consolidated statements of cash flows as operating activities. Cumulative distributions in excess of the Company’sshare of cumulative earnings are treated as returns of capital and included in the Company’s consolidated statements of cash flows as cash from investingactivities.Consolidation of Variable Interest EntitiesGAAP requires the consolidation of VIEs in which an enterprise has a controlling financial interest. A controlling financial interest will have both ofthe following characteristics: (a) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (b) theobligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially besignificant to the VIE.The Company’s variable interest in VIEs may be in the form of (1) equity ownership, (2) contracts to purchase assets, (3) management anddevelopment agreements between the Company and a VIE, (4) loans provided by the Company to a VIE or other partner and/or (5) guarantees provided bymembers to banks and other third parties. The Company examines specific criteria and uses its judgment when determining if it is the primary beneficiary of aVIE. Factors considered in determining whether the Company is the primary beneficiary include risk and reward sharing, experience and financial conditionof other partner(s), voting rights, involvement in day-to-day capital and operating decisions, representation on a VIE’s executive committee, existence ofunilateral kick-out rights or voting rights, level of economic disproportionality, if any, between the Company and the other partner(s) and contracts topurchase assets from VIEs. The determination whether an entity is a VIE and, if so, whether the Company is the primary beneficiary may require it to exercisesignificant judgment.Generally, all major decision making in the Company’s joint ventures is shared among all partners. In particular, business plans and budgets aregenerally required to be unanimously approved by all partners. Usually, management and other fees earned by the Company are nominal and believed to beat market and there is no significant economic disproportionality between the Company and other partners. Generally, the Company purchases less than amajority of the JV’s assets and the purchase prices under its option contracts are believed to be at market.Generally, Lennar Homebuilding and Lennar Multifamily unconsolidated entities become VIEs and consolidate when the other partner(s) lack theintent and financial wherewithal to remain in the entity. As a result, the Company continues to fund operations and debt paydowns through partner loans orsubstituted capital contributions.Operating Properties and EquipmentOperating properties and equipment are recorded at cost and are included in other assets in the consolidated balance sheets. The assets aredepreciated over their estimated useful lives using the straight-line method. At the time operating properties and equipment are disposed of, the asset andrelated accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to earnings. The estimated useful life foroperating properties is 30 years, for furniture, fixtures and equipment is two to ten years and for leasehold improvements is five years or the life of the lease,whichever is shorter. Operating properties are reviewed for possible impairment if there are indicators that their carrying amounts are not recoverable.74Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Investment SecuritiesInvestment securities are classified as available-for-sale unless they are classified as trading or held-to-maturity. Securities classified as trading arecarried at fair value and unrealized holding gains and losses are recorded in earnings. Available-for-sale securities are recorded at fair value. Any unrealizedholding gains or losses on available-for-sale securities are reported as accumulated other comprehensive gain or loss, which is a separate component ofstockholders’ equity, net of tax, until realized. Securities classified as held-to-maturity are carried at amortized cost because they are purchased with theintent and ability to hold to maturity.At November 30, 2016 and 2015, the Lennar Financial Services segment had investment securities classified as held-to-maturity totaling $42.0million and $40.2 million, respectively, which consist mainly of corporate debt obligations, U.S. government agency obligations, certificates of deposit andU.S. treasury securities that mature at various dates, mainly within five years. Also, at November 30, 2016 and 2015, the Lennar Financial Services segmenthad available-for-sale securities totaling $53.6 million and $42.8 million, respectively, which consist primarily of preferred stock and mutual funds. Theseinvestments available-for-sale are carried at fair value with changes recorded as a component of accumulated other comprehensive income (loss).In addition, at November 30, 2016 and 2015, the Rialto segment had investment securities classified as held-to-maturity totaling $71.3 million and$25.6 million, respectively. The Rialto segment held-to-maturity securities consist of commercial mortgage-backed securities ("CMBS").At both November 30, 2016 and 2015, the Company had no investment securities classified as trading.Interest and Real Estate TaxesInterest and real estate taxes attributable to land and homes are capitalized as inventory costs while they are being actively developed. Interestrelated to homebuilding and land, including interest costs relieved from inventories, is included in costs of homes sold and costs of land sold. Interestexpense related to the Lennar Financial Services operations is included in its costs and expenses.During the years ended November 30, 2016, 2015 and 2014, interest incurred by the Company’s homebuilding operations related to homebuildingdebt was $281.4 million, $288.5 million and $273.4 million, respectively; interest capitalized into inventories was $276.8 million, $276.1 million and$236.9 million, respectively.Interest expense was included in costs of homes sold, costs of land sold and other interest expense as follows: Years Ended November 30,(In thousands)2016 2015 2014Interest expense in costs of homes sold$235,148 205,200 161,371Interest expense in costs of land sold5,287 2,493 3,617Other interest expense4,626 12,454 36,551Total interest expense$245,061 220,147 201,539Income TaxesThe Company records income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on thefuture tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and theirrespective tax bases and attributable to operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax ratesexpected to apply in the years in which the temporary differences are expected to be recovered or paid. The effect on deferred tax assets and liabilities of achange in tax rates is recognized in earnings in the period when the changes are enacted. Interest related to unrecognized tax benefits is recognized in thefinancial statements as a component of income tax expense.A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on the available evidence, it is more likelythan not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed each reporting periodby the Company based on the consideration of all available positive and negative evidence using a "more-likely-than-not" standard with respect to whetherdeferred tax assets will be realized. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses,actual earnings, forecasts of future profitability, the duration of statutory carryforward periods, the Company’s experience with loss carryforwards notexpiring unused and tax planning alternatives.75Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Based on the analysis of positive and negative evidence, the Company believed that there was enough positive evidence for the Company toconclude that it was more likely than not that the Company would realize the majority of its deferred tax assets. As of November 30, 2016 and 2015, theCompany's net deferred tax assets included a valuation allowance of $5.8 million and $5.9 million, respectively. See Note 10 for additional information.Product WarrantyWarranty and similar reserves for homes are established at an amount estimated to be adequate to cover potential costs for materials and labor withregard to warranty-type claims expected to be incurred subsequent to the delivery of a home. Reserves are determined based on historical data and trends withrespect to similar product types and geographical areas. The Company regularly monitors the warranty reserve and makes adjustments to its pre-existingwarranties in order to reflect changes in trends and historical data as information becomes available. Warranty reserves are included in Lennar Homebuildingother liabilities in the consolidated balance sheets. The activity in the Company’s warranty reserve was as follows: November 30,(In thousands)2016 2015Warranty reserve, beginning of year$130,853 115,927Warranties issued96,934 81,505Adjustments to pre-existing warranties from changes in estimates (1)2,079 11,451Payments(94,463) (78,030)Warranty reserve, end of year$135,403 130,853(1)The adjustments to pre-existing warranties from changes in estimates during the years ended November 30, 2016 and 2015 primarily related to specific claims related to certainof our homebuilding communities and other adjustments.Self-InsuranceCertain insurable risks such as construction defects, general liability, medical and workers’ compensation are self-insured by the Company up tocertain limits. Undiscounted accruals for claims under the Company’s self-insurance program are based on claims filed and estimates for claims incurred butnot yet reported. The Company’s self-insurance reserve as of November 30, 2016 and 2015 was $87.6 million and $96.5 million, respectively, of which $57.4million and $65.0 million, respectively, was included in Lennar Financial Services’ other liabilities in the respective years. Amounts incurred in excess of theCompany's self-insurance occurrence or aggregate retention limits are covered by insurance up to the Company's purchased coverage levels. The Company'sinsurance policies are maintained with highly-rated underwriters for whom the Company believes counterparty default risk is not significant.Earnings per ShareBasic earnings per share is computed by dividing net earnings attributable to common stockholders by the weighted average number of commonshares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue commonstock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in earnings of the Company.All outstanding nonvested shares that contain non-forfeitable rights to dividends or dividend equivalents that participate in undistributed earningswith common stock are considered participating securities and are included in computing earnings per share pursuant to the two-class method. The two-classmethod is an earnings allocation formula that determines earnings per share for each class of common stock and participating securities according todividends or dividend equivalents and participation rights in undistributed earnings. The Company’s restricted common stock ("nonvested shares") areconsidered participating securities.Lennar Financial ServicesRevenue RecognitionTitle premiums on policies issued directly by the Company are recognized as revenue on the effective date of the title policies and escrow fees andloan origination revenues are recognized at the time the related real estate transactions are completed, usually upon the close of escrow. Revenues from titlepolicies issued by independent agents are recognized as revenue when notice of issuance is received from the agent, which is generally when cash payment isreceived by the Company. Expected gains and losses from the sale of loans and their related servicing rights are included in the measurement of all writtenloan commitments that are accounted for at fair value through earnings at the time of commitment. Interest income on loans76Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)held-for-sale and loans held-for-investment is recognized as earned over the terms of the mortgage loans based on the contractual interest rates.Loans Held-for-SaleLoans held-for-sale by the Lennar Financial Services segment, including the rights to service the mortgage loans, are carried at fair value andchanges in fair value are reflected in earnings. Premiums and discounts recorded on these loans are presented as an adjustment to the carrying amount of theloans and are not amortized. Management believes carrying loans held-for-sale at fair value improves financial reporting by mitigating volatility in reportedearnings caused by measuring the fair value of the loans and the derivative instruments used to economically hedge them without having to apply complexhedge accounting provisions.In addition, the Lennar Financial Services segment recognizes the fair value of its rights to service a mortgage loan as revenue upon entering into aninterest rate lock loan commitment with a borrower. The fair value of these servicing rights is included in Lennar Financial Services' other assets as ofNovember 30, 2016 and 2015. Fair value of the servicing rights is determined based on values in the Company’s servicing sales contracts.Provision for LossesThe Company establishes reserves for possible losses associated with mortgage loans previously originated and sold to investors based upon, amongother things, an analysis of repurchase requests received, an estimate of potential repurchase claims not yet received and actual past repurchases and lossesthrough the disposition of affected loans, as well as previous settlements. Loan origination liabilities are included in Lennar Financial Services’ liabilities inthe consolidated balance sheets. The activity in the Company’s loan origination liabilities was as follows: November 30,(In thousands)2016 2015Loan origination liabilities, beginning of year$19,492 11,818Provision for losses4,627 4,040Adjustments to pre-existing provisions for losses from changes in estimates (1)1,224 4,415Payments/settlements(438) (781)Loan origination liabilities, end of year$24,905 19,492(1)The adjustments to pre-existing provisions for losses from changes in estimates for the years ended November 30, 2016 and 2015 primarily related to an adjustment foradditional repurchase requests that were received beyond the estimated provision that was recorded.Loans Held-for-Investment, NetLoans for which the Company has the positive intent and ability to hold to maturity consist of mortgage loans carried at the principal amountoutstanding, net of unamortized discounts and allowance for loan losses. Discounts are amortized over the estimated lives of the loans using the interestmethod.The Lennar Financial Services segment also provides an allowance for loan losses. The provision recorded and the adequacy of the relatedallowance is determined by management’s continuing evaluation of the loan portfolio in light of past loan loss experience, credit worthiness and nature ofunderlying collateral, present economic conditions and other factors considered relevant by the Company’s management. Anticipated changes in economicfactors, which may influence the level of the allowance, are considered in the evaluation by the Company’s management when the likelihood of the changescan be reasonably determined. While the Company’s management uses the best information available to make such evaluations, future adjustments to theallowance may be necessary as a result of future economic and other conditions that may be beyond management’s control. Derivative Financial InstrumentsThe Lennar Financial Services segment, in the normal course of business, uses derivative financial instruments to reduce its exposure to fluctuationsin mortgage-related interest rates. The segment uses mortgage-backed securities ("MBS") forward commitments, option contracts, future contracts andinvestor commitments to protect the value of fixed rate-locked loan commitments and loans held-for-sale from fluctuations in mortgage-related interest rates.These derivative financial instruments are carried at fair value with the changes in fair value included in Lennar Financial Services revenues.77Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)RialtoManagement Fee RevenueThe Rialto segment provides services to a variety of legal entities and investment vehicles such as funds, joint ventures, co-invests, and other privateequity structures to manage their respective investments. As a result, Rialto earns and receives management fees, underwriting fees and due diligence fees.These fees are included in Rialto revenues and are recorded over the period in which the services are performed, fees are determinable and collectability isreasonably assured. Rialto receives investment management fees from investment vehicles based on 1) a percentage of committed or called capital during thecommitment period and called capital after the commitment period ends and 2) a percentage of invested capital less the portion of such invested capitalutilized to acquire investments that have been sold (in whole or in part) or liquidated. Fees earned for underwriting and due diligence services are based onactual costs incurred. In certain situations, Rialto may earn additional fees when the return on assets managed exceeds contractually established thresholds.Such revenue is only booked when the contract terms are met, the contract is at, or near, completion and the amounts are known and collectability isreasonably assured. Since such revenue is recognized during the latter half of the life of the investment vehicle, after substantially all of the assets have beensold and investment gains and losses realized, the possibility of claw backs is limited. In addition, Rialto may also receive tax distributions in order to coverincome tax obligations resulting from allocations of taxable income due to Rialto's carried interests in the funds. These distributions are not subject toclawbacks and therefore are recorded as revenue when received.Rialto Mortgage Finance - Loans Held-for-SaleThe originated mortgage loans are classified as loans held-for-sale and are recorded at fair value. The Company elected the fair value option forRMF's loans held-for-sale in accordance with Accounting Standards Codification ("ASC") 825, Financial Instruments, which permits entities to measurevarious financial instruments and certain other items at fair value on a contract-by-contract basis. Management believes that carrying loans held-for-sale atfair value improves financial reporting by mitigating volatility in reported earnings caused by measuring the fair value of the loans and the derivativeinstruments, which are also carried at fair value, used to economically hedge them without having to apply complex hedge accounting provisions. Changesin fair values of the loans are reflected in Rialto revenues in the accompanying consolidated statements of operations. Interest income on these loans iscalculated based on the interest rate of the loan and is recorded in Rialto revenues in the accompanying consolidated statements of operations. Substantiallyall of the mortgage loans originated are sold within a short period of time in a securitization on a servicing released, non-recourse basis; although, theCompany remains liable for certain limited industry-standard representations and warranties related to loan sales. The Company recognizes revenue on thesale of loans into securitization trusts when control of the loans has been relinquished.Real Estate OwnedReal estate owned ("REO") represents real estate that the Rialto segment has taken control in partial or full satisfaction of loans receivable. At thetime of acquisition of a property through foreclosure of a loan, REO is recorded at fair value less estimated costs to sell if classified as held-for-sale or at fairvalue if classified as held-and-used, which becomes the property’s new basis. The fair values of these assets are determined in part by placing reliance onthird-party appraisals of the properties and/or internally prepared analyses of recent offers or prices on comparable properties in the proximate vicinity. Thethird-party appraisals and internally developed analyses are significantly impacted by the local market economy, market supply and demand, competitiveconditions and prices on comparable properties, adjusted for anticipated date of sale, location, property size, and other factors. Each REO is unique and isanalyzed in the context of the particular market where the property is located. In order to establish the significant assumptions for a particular REO, theCompany analyzes historical trends, including trends achieved by the Company's local homebuilding operations, if applicable, and current trends in themarket and economy impacting the REO. Using available trend information, the Company then calculates its best estimate of fair value, which can includeprojected cash flows discounted at a rate the Company believes a market participant would determine to be commensurate with the inherent risks associatedwith the assets and related estimated cash flow streams. These methods use unobservable inputs to develop fair value for the Company’s REO. Due to thevolume and variance of unobservable inputs, resulting from the uniqueness of each of the Company's REO, the Company does not use a standard range ofunobservable inputs with respect to its evaluation of REO. However, for operating properties included within REO, the Company may also use estimated cashflows multiplied by a capitalization rate to determine the fair value of the property. Generally, the capitalization rates used to estimate fair value ranged from8% to 12% and varied based on the location of the asset, asset type and occupancy rates for the operating properties.78Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Changes in economic factors, consumer demand and market conditions, among other things, could materially impact estimates used in the third-party appraisals and/or internally prepared analyses of recent offers or prices on comparable properties. Thus, estimates can differ significantly from theamounts ultimately realized by the Rialto segment from disposition of these assets. The amount by which the recorded investment in the loan is less than theREO’s fair value (net of estimated cost to sell if held-for-sale), is recorded as an unrealized gain upon foreclosure in the Company’s consolidated statementsof operations. The amount by which the recorded investment in the loan is greater than the REO’s fair value (net of estimated cost to sell if held-for-sale) isrecorded as a provision for loan losses in the Company’s consolidated statements of operations.Additionally, REO includes real estate which Rialto has purchased directly from financial institutions. These REOs are recorded at cost or allocatedcost if purchased in a bulk transaction.Subsequent to obtaining REO via foreclosure or directly from a financial institution, management periodically performs valuations using themethodologies described above such that the real estate is carried at the lower of its carrying value or current fair value, less estimated costs to sell ifclassified as held-for-sale. Held-and-used assets are tested for recoverability whenever changes in circumstances indicate that the carrying value may not berecoverable, and impairment losses are recorded for any amount by which the carrying value exceeds its fair value. Any subsequent impairment losses,operating expenses or income, and gains and losses on disposition of such properties are also recognized in Rialto other income (expense), net. REO assetsclassified as held-and-used are depreciated using a useful life of forty years for commercial properties and twenty seven and a half years for residentialproperties. REO assets classified as held-for-sale are not depreciated. Occasionally an asset will require certain improvements to yield a higher return. Inaccordance with ASC 970-340-25, Real Estate, construction costs incurred prior to acquisition or during development of the asset may be capitalized.Derivative InstrumentsThe Rialto segment, in the normal course of business, uses derivative financial instruments on loans held-for-sale in order to minimize its exposureto fluctuations in mortgage-related interest rates as well as lessen its credit risk. The segment hedges interest rate exposure by entering into interest rate swapsand swap futures. These derivative financial instruments are carried at fair value with derivative instruments in gain positions recorded in other assets whilederivative instruments in loss positions are recorded in other liabilities.Consolidations of Variable Interest EntitiesIn 2010, the Rialto segment acquired indirectly 40% managing member equity interests in two limited liability companies ("LLCs"), in partnershipwith the FDIC. The Company determined that each of the LLCs met the definition of a VIE and that the Company was the primary beneficiary. In accordancewith ASC 810-10-65-2, Consolidations, ("ASC 810-10-65-2"), the Company identified the activities that most significantly impact the LLCs’ economicperformance and determined that it has the power to direct those activities. The economic performance of the LLCs is most significantly impacted by theperformance of the LLCs’ portfolios of assets, which consisted primarily of distressed residential and commercial mortgage loans. Thus, the activities thatmost significantly impact the LLCs’ economic performance are the servicing and disposition of mortgage loans and real estate obtained through foreclosureof loans, restructuring of loans, or other planned activities associated with the monetizing of loans. At November 30, 2016, these consolidated LLCs had totalcombined assets and liabilities of $213.8 million and $10.3 million, respectively. At November 30, 2015, these consolidated LLCs had total combined assetsand liabilities of $355.2 million and $11.3 million, respectively.The FDIC does not have the unilateral power to terminate the Company’s role in managing the LLCs and servicing the loan portfolios. While theFDIC has the right to prevent certain types of transactions (i.e., bulk sales, selling assets with recourse back to the selling entity, selling assets withrepresentations and warranties and financing the sales of assets without the FDIC’s approval), the FDIC does not have full voting or blocking rights over theLLCs’ activities, making their voting rights protective in nature, not substantive participating voting rights. Other than as described in the precedingsentence, which are not the primary activities of the LLCs, the Company can cause the LLCs to enter into both the disposition and restructuring of loanswithout any involvement of the FDIC. Additionally, the FDIC has no voting rights with regard to the operation/management of the operating properties thatare acquired upon foreclosure of loans (e.g. REO) and no voting rights over the business plans of the LLCs. The FDIC can make suggestions regarding thebusiness plans, but the Company can decide not to follow the FDIC’s suggestions and not to incorporate them in the business plans. Since the FDIC’s votingrights are protective in nature and not substantive participating voting rights, the Company has the power to direct the activities that most significantlyimpact the LLCs’ economic performance.79Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)In accordance with ASC 810-10-65-2, the Company determined that it had an obligation to absorb losses of the LLCs that could potentially besignificant to the LLCs or the right to receive benefits from the LLCs that could potentially be significant to the LLCs based on the following factors:•Rialto/Lennar owns 40% of the equity of the LLCs and has the power to direct the activities of the LLCs that most significantly impact theireconomic performance through loan resolutions and the sale of REO.•Rialto/Lennar has a management/servicer contract under which the Company earns a 0.5% servicing fee.•Rialto/Lennar has guaranteed, as the servicer, its obligations under the servicing agreement up to $10 million.The Company is aware that the FDIC, as the owner of 60% of the equity of each of the LLCs, may also have an obligation to absorb losses of theLLCs that could potentially be significant to the LLCs. However, in accordance with ASC 810-10-25-38A, only one enterprise, if any, is expected to beidentified as the primary beneficiary of a VIE.Since both criteria for consolidation in ASC 810-10-65-2 are met, the Company consolidated the LLCs.Voting Interest EntitiesRialto Real Estate Fund, LP ("Fund I"), Rialto Real Estate Fund II, LP ("Fund II"), Rialto Real Estate Fund III ("Fund III"), Rialto Mezzanine PartnersFund, LP ("Mezzanine Fund") and the Rialto Credit Partnership, LP ("RCP") are unconsolidated entities and are accounted for under the equity method ofaccounting. They were determined to have the attributes of an investment company in accordance with ASC Topic 946, Financial Services – InvestmentCompanies, the attributes of which are different from the attributes that would cause a company to be an investment company for purposes of the InvestmentCompany Act of 1940. As a result, Fund I, Fund II, Fund III, Mezzanine Fund, and the RCP's assets and liabilities are recorded at fair value withincreases/decreases in fair value recorded in their respective statements of operations, the Company’s share of which will be recorded in the Rialto equity inearnings (loss) from unconsolidated entities financial statement line item. The Company determined that Fund I, Fund II, Fund III, Mezzanine Fund, and theRCP are not variable interest entities but rather voting interest entities due to the following factors:•The Company determined that Rialto’s general partner interest and all the limited partners’ interests qualify as equity investment at risk.•Based on the capital structure of Fund I, Fund II, Fund III, Mezzanine Fund, and the RCP (100% capitalized via equity contributions), theCompany was able to conclude that the equity investment at risk was sufficient to allow Fund I, Fund II, Fund III, Mezzanine Fund and the RCPto finance its activities without additional subordinated financial support.•The general partner and the limited partners in Fund I, Fund II, Fund III, Mezzanine Fund and the RCP, collectively, have full decision-makingability as they collectively have the power to direct the activities of Fund I, Fund II, Fund III, Mezzanine Fund and the RCP, since Rialto, inaddition to being a general partner with a substantive equity investment in Fund I, Fund II, Fund III, Mezzanine Fund and the RCP, alsoprovides services to Fund I, Fund II, Fund III, Mezzanine Fund and the RCP, under a management agreement and an investment agreement,which are not separable from Rialto’s general partnership interest.•As a result of all these factors, the Company has concluded that the power to direct the activities of Fund I, Fund II, Fund III, Mezzanine Fund,and the RCP reside in its general partnership interest and thus with the holders of the equity investment at risk.•In addition, there are no guaranteed returns provided to the equity investors and the equity contributions are fully subjected to Fund I, Fund II,Fund III, Mezzanine Fund and the RCP's operational results, thus the equity investors absorb the expected negative and positive variabilityrelative to Fund I, Fund II, Fund III, Mezzanine Fund and the RCP.•Finally, substantially all of the activities of Fund I, Fund II, Fund III, Mezzanine Fund and the RCP are not conducted on behalf of anyindividual investor or related group that has disproportionately few voting rights (i.e., on behalf of any individual limited partner).Having concluded that Fund I, Fund II, Fund III, Mezzanine Fund and the RCP are voting interest entities, the Company has evaluated the fundsunder the voting interest entity model to determine whether, as general partner, it has control over Fund I, Fund II, Fund III, Mezzanine Fund and the RCP.The Company determined that it does not control Fund I, Fund II, Fund III, Mezzanine Fund or the RCP as its general partner, because the unaffiliated limitedpartners have substantial kick-out rights and can remove Rialto as general partner at any time for cause or without cause through a simple majority vote of thelimited partners or in the case of the RCP, and individual limited partner. In addition, there are no significant barriers to the exercise of these rights. As aresult of determining that the Company does not control Fund I, Fund II, Fund III, Mezzanine Fund or the RCP under the voting interest entity model, Fund I,Fund II, Fund III, Mezzanine Fund and the RCP are not consolidated in the Company’s financial statements.80Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Lennar MultifamilyManagement Fees and General Contractor RevenueThe Lennar Multifamily segment provides management services with respect to the development, construction and property management of rentalprojects in joint ventures in which the Company has investments. As a result, the Lennar Multifamily segment earns and receives fees, which are generallybased upon a stated percentage of development and construction costs and a percentage of gross rental collections. These fees are included in LennarMultifamily revenue and are recorded over the period in which the services are performed, fees are determinable and collectability is reasonably assured. Inaddition, the Lennar Multifamily provides general contractor services for the construction of some of its rental projects and recognizes the revenue over theperiod in which the services are performed under the percentage of completion method.New Accounting PronouncementsIn May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, Revenue from Contracts with Customers, ("ASU 2014-09").ASU 2014-09 provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes mostcurrent revenue recognition guidance, including industry-specific guidance. ASU 2014-09 will require an entity to recognize revenue when it transferspromised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods orservices. This update creates a five-step model that requires entities to exercise judgment when considering the terms of the contract(s) which include (i)identifying the contract(s) with the customer, (ii) identifying the separate performance obligations in the contract, (iii) determining the transaction price, (iv)allocating the transaction price to the separate performance obligations, and (v) recognizing revenue when each performance obligation is satisfied. In July2015, the FASB deferred the effective date by one year and permitted early adoption of the standard, but not before the original effective date; therefore, ASU2014-09 will be effective for the Company’s fiscal year beginning December 1, 2018 and subsequent interim periods. The Company has the option to applythe provisions of ASU 2014-09 either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of applying thisASU recognized at the date of initial application. The Company is currently evaluating the method and impact the adoption of ASU 2014-09 will have on theCompany's consolidated financial statements.Subsequent to the issuance of ASU 2014-09, the FASB has issued several ASUs such as ASU 2016-08, Revenue from Contracts with Customers(Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU 2016-09, Compensation - Stock Compensation (Topic 718):Improvements to Employee Share-Based Payment Accounting, and ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-ScopeImprovements and Practical Expedients among others. These ASUs do not change the core principle of the guidance stated in ASU 2014-09, instead theseamendments are intended to clarify and improve operability of certain topics included within the revenue standard. These ASUs will have the same effectivedate and transition requirements as ASU 2014-09. The Company is currently evaluating the method and impact the adoption of these ASUs and ASU 2014-09will have on the Company's consolidated financial statements.In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis ("ASU 2015-02"). ASU2015-02 amends the consolidation requirements and significantly changes the consolidation analysis required. ASU 2015-02 requires management toreevaluate all legal entities under a revised consolidation model specifically (i) modify the evaluation of whether limited partnership and similar legalentities are VIEs, (ii) eliminate the presumption that a general partner should consolidate a limited partnership, (iii) affect the consolidation analysis ofreporting entities that are involved with VIEs particularly those that have fee arrangements and related party relationships, and (iv) provide a scope exceptionfrom consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirementsthat are similar to those in Rule 2a-7 of the Investment Act of 1940 for registered money market funds. ASU 2015-02 will be effective for the Company’sfiscal year beginning December 1, 2016 and subsequent interim periods. The adoption of ASU 2015-02 is not expected to have a material effect on theCompany’s consolidated financial statements.In April 2015, the FASB issued ASU 2015-05, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customers' Accountingfor Fees Paid in a Cloud Computing Arrangement ("ASU 2015-05"). ASU 2015-05 provides guidance for a customer to determine whether a cloudcomputing arrangement contains a software license or should be accounted for as a service contract. ASU 2015-05 will be effective for the Company’s fiscalyear beginning December 1, 2016 and subsequent interim periods. As permitted, the Company elected early adoption. The adoption of ASU 2015-05 did nothave a material effect on the Company’s consolidated financial statements.81Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments ("ASU 2015-16"). ASU 2015-16 requires an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in whichthe adjustment amounts are determined. ASU 2015-16 will be effective for the Company’s fiscal year beginning December 1, 2017 and subsequent interimperiods. The adoption of ASU 2015-16 is not expected to have a material effect on the Company’s consolidated financial statements.In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and FinancialLiabilities ("ASU 2016-01"). ASU 2016-01 modifies how entities measure equity investments and present changes in the fair value of financial liabilities.Under the new guidance, entities will have to measure equity investments that do not result in consolidation and are not accounted for under the equitymethod at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicality exception. A practicalityexception will apply to those equity investments that do not have a readily determinable fair value and do not qualify for the practical expedient to estimatefair value under ASC 820, Fair Value Measurements, and as such these investments may be measured at cost. ASU 2016-01 will be effective for theCompany’s fiscal year beginning December 1, 2018 and subsequent interim periods. The adoption of ASU 2016-01 is not expected to have a material effecton the Company’s consolidated financial statements.In March 2016, the FASB issued ASU 2016-02, Leases ("ASU 2016-02"), which provides guidance for accounting for leases. ASU 2016-02 requireslessees to classify leases as either finance or operating leases and to record a right-of-use asset and a lease liability for all leases with a term greater than 12months regardless of the lease classification. The lease classification will determine whether the lease expense is recognized based on an effective interest ratemethod or on a straight line basis over the term of the lease. Accounting for lessors remains largely unchanged from current GAAP. ASU 2016-02 will beeffective for the Company’s fiscal year beginning December 1, 2019 and subsequent interim periods. The Company is currently evaluating the impact theadoption of ASU 2016-02 will have on the Company's consolidated financial statements.In March 2016, the FASB issued ASU 2016-07, Investments- Equity Method and Joint Ventures: Simplifying the Transition to the Equity Method ofAccounting ("ASU 2016-07"). ASU 2016-07 eliminates the requirement to apply the equity method of accounting retrospectively when a reporting entityobtains significant influence over a previously held investment. ASU 2016-07 will be effective for the Company’s fiscal year beginning December 1, 2017and subsequent interim periods. The adoption of ASU 2016-07 is not expected to have a material effect on the Company’s consolidated financial statements.In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based PaymentAccounting ("ASU 2016-09"). ASU 2016-09 simplifies several aspects related to the accounting for share-based payment transactions, including theaccounting for income taxes, statutory tax withholding requirements and classification on the statement of cash flows. ASU 2016-09 will be effective for theCompany’s fiscal year beginning December 1, 2017 and subsequent interim periods. The Company is currently evaluating the potential impact of ASU 2016-09 but the Company does not expect it to have a material impact on the Company's consolidated financial statements.In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments("ASU 2016-15"). ASU 2016-15 reduces the existing diversity in practice in financial reporting across all industries by clarifying certain existing principlesin ASC 230, Statement of Cash Flows, ("ASC 230") including providing additional guidance on how and what an entity should consider in determining theclassification of certain cash flows. In addition, in November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash("ASU 2016-18"). ASU 2016-18 clarifies certain existing principles in ASC 230, including providing additional guidance related to transfers between cashand restricted cash and how entities present, in their statement of cash flows, the cash receipts and cash payments that directly affect the restricted cashaccounts. These ASUs will be effective for the Company’s fiscal year beginning December 1, 2018 and subsequent interim periods. Early adoption ispermitted. The adoption of ASU 2016-15 and ASU 2016-18 will modify the Company's current disclosures and reclassifications within the consolidatedstatement of cash flows but they are not expected to have a material effect on the Company’s consolidated financial statements.Reclassifications/RevisionsAs a result of the Company's change in reportable segments during fiscal year 2016, the Company restated certain prior year amounts in theconsolidated financial statements to conform with the 2016 presentation (see Note 2). These reclassifications had no impact on the Company's consolidatedfinancial statements.82Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)2. Operating and Reporting SegmentsAs of and for the year ended November 30, 2016, the Company’s operating segments are aggregated into reportable segments, based primarily uponsimilar economic characteristics, geography and product type. The Company’s reportable segments consist of:(1)Homebuilding East(2)Homebuilding Central(3)Homebuilding West(4)Lennar Financial Services(5)Rialto(6)Lennar MultifamilyDuring the fourth quarter of 2016, the Company evaluated all of its reportable segments and as the Houston operating division, which previouslyhad been reported a separate reportable segment, did not meet the reportable criteria set forth in ASC 280, Segment Reporting ("ASC 280"), the Companyaggregated this operating division into the Homebuilding Central reportable segment as this division exhibits similar economic characteristics, geographyand product type as the other divisions in Homebuilding Central.In addition, during the first quarter of 2016, the Company made the decision to divide the Southeast Florida operating division into two operatingsegments to maximize operational efficiencies given the continued growth of the division. As a result of this change in management structure, the Companyre-evaluated its reportable segments and determined that neither operating segment met the reportable criteria set forth in ASC 280. The Company aggregatedthese operating segments into the Homebuilding East reportable segment as these divisions exhibit similar economic characteristics, geography and producttype as the other divisions in Homebuilding East.All prior year segment information has been restated to conform with the 2016 presentation. The changes in the reportable segments have no effecton the Company's consolidated financial position, results of operations or cash flows for the periods presented.Information about homebuilding activities in states which are not economically similar to other states in the same geographic area is grouped under"Homebuilding Other," which is not considered a reportable segment.Evaluation of segment performance is based primarily on operating earnings (loss) before income taxes. Operations of the Company’s homebuildingsegments primarily include the construction and sale of single-family attached and detached homes, as well as the purchase, development and sale ofresidential land directly and through the Company’s unconsolidated entities. Operating earnings (loss) for the homebuilding segments consist of revenuesgenerated from the sales of homes and land, equity in earnings (loss) from unconsolidated entities and other income (expense), net, less the cost of homes soldand land sold, selling, general and administrative expenses and other interest expense of the segment.The Company’s reportable homebuilding segments and all other homebuilding operations not required to be reported separately, havehomebuilding divisions located in:East: Florida, Georgia, Maryland, New Jersey, North Carolina, South Carolina and VirginiaCentral: Arizona, Colorado and TexasWest: California and NevadaOther: Illinois, Minnesota, Oregon, Tennessee and WashingtonOperations of the Lennar Financial Services segment include primarily mortgage financing, title insurance and closing services for both buyers ofthe Company’s homes and others. The Lennar Financial Services segment sells substantially all of the loans it originates within a short period in thesecondary mortgage market, the majority of which are sold on a servicing released, non-recourse basis. After the loans are sold, the Company retains potentialliability for possible claims by purchasers that it breached certain limited industry-standard representations and warranties in the loan sale agreements.Lennar Financial Services’ operating earnings consist of revenues generated primarily from mortgage financing, title insurance and closing services, less thecost of such services and certain selling, general and administrative expenses incurred by the segment. The Lennar Financial Services segment operatesgenerally in the same states as the Company’s homebuilding operations as well as in other states.83Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Operations of the Rialto segment include raising, investing and managing third-party capital, originating and securitizing commercial mortgageloans as well as investing its own capital in real estate related mortgage loans, properties and related securities. Rialto utilizes its vertically-integratedinvestment and operating platform to underwrite, diligence, acquire, manage, workout and add value to diverse portfolios of real estate loans, properties andreal estate related securities as well as providing strategic real estate capital. Rialto’s operating earnings consist of revenues generated primarily from gainsfrom securitization transactions and interest income from the RMF business, interest income associated with portfolios of real estate loans acquired and otherportfolios of real estate loans and assets acquired, asset management, due diligence and underwriting fees derived from the real estate investment fundsmanaged by the Rialto segment, fees for sub-advisory services, other income (expense), net, and equity in earnings (loss) from unconsolidated entities, lessthe costs incurred by the segment for managing portfolios, costs related to RMF and other general and administrative expenses.Operations of the Lennar Multifamily segment include revenues generated from land sales, revenue from construction activities and managementfees generated from joint ventures, and equity in earnings (loss) from unconsolidated entities, less the cost of land sold, expenses related to constructionactivities and general and administrative expenses.Each reportable segment follows the same accounting policies described in Note 1—"Summary of Significant Accounting Policies" to theconsolidated financial statements. Operational results of each segment are not necessarily indicative of the results that would have occurred had the segmentbeen an independent, stand-alone entity during the periods presented.Financial information relating to the Company’s operations was as follows: November 30,(In thousands)2016 2015 2014Assets: Homebuilding East$3,512,990 3,140,604 3,046,684Homebuilding Central1,993,403 1,902,581 1,632,529Homebuilding West4,318,924 4,157,616 3,454,611Homebuilding Other907,523 858,000 880,912Rialto1,276,210 1,505,500 1,451,983Lennar Financial Services1,754,672 1,425,837 1,177,053Lennar Multifamily526,131 415,352 268,014Corporate and unallocated1,071,928 1,014,019 1,011,365Total assets$15,361,781 14,419,509 12,923,151Lennar Homebuilding investments in unconsolidated entities: Homebuilding East$62,900 40,573 43,290Homebuilding Central36,031 35,925 35,934Homebuilding West696,471 649,170 564,643Homebuilding Other16,321 15,883 12,970Total Lennar Homebuilding investments in unconsolidated entities$811,723 741,551 656,837Rialto investments in unconsolidated entities$245,741 224,869 175,700Lennar Multifamily investments in unconsolidated entities$318,559 250,876 105,674Rialto goodwill$5,396 5,396 5,396Lennar Financial Services goodwill$39,838 38,854 38,85484Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Years Ended November 30,(In thousands)2016 2015 2014Revenues: Homebuilding East$3,941,336 3,563,678 2,940,579Homebuilding Central2,283,579 1,944,312 1,650,053Homebuilding West2,757,658 2,365,519 1,796,375Homebuilding Other758,764 593,436 638,123Lennar Financial Services687,255 620,527 454,381Rialto233,966 221,923 230,521Lennar Multifamily287,441 164,613 69,780Total revenues (1)$10,949,999 9,474,008 7,779,812Operating earnings (loss): Homebuilding East$617,175 580,863 502,071Homebuilding Central245,975 208,698 183,207Homebuilding West (2)396,346 435,818 292,719Homebuilding Other85,436 46,262 55,724Lennar Financial Services163,617 127,795 80,138Rialto (3)(16,692) 33,595 44,079Lennar Multifamily (4)71,174 (7,171) (10,993)Total operating earnings1,563,031 1,425,860 1,146,945Corporate general and administrative expenses232,562 216,244 177,161Earnings before income taxes$1,330,469 1,209,616 969,784(1)Total revenues were net of sales incentives of $596.3 million ($22,500 per home delivered) for the year ended November 30, 2016, $518.1 million ($21,400 per homedelivered) for the year ended November 30, 2015 and $449.2 million ($21,400 per home delivered) for the year ended November 30, 2014.(2)For the year ended November 30, 2016, Homebuilding West's operating earnings included an equity in loss from unconsolidated entities of ($49.7) million and for the yearended November 30, 2015 included equity in earnings from unconsolidated entities of $63.0 million, refer to the following table for additional details.(3)For the year ended November 30, 2016, Rialto's operating loss included a $16.0 million write-off of uncollectible receivables related to a hospital, which was acquired throughthe resolution of one of Rialto's loans from a 2010 portfolio.(4)For the year ended November 30, 2016, Lennar Multifamily's operating earnings included $85.5 million of equity in earnings from unconsolidated entities primarily as a resultof $91.0 million share of gains from the sale of seven operating properties by its unconsolidated entities. For the years ended November 30, 2015 and 2014, operating earningsincluded $19.5 million and $14.5 million, respectively, of equity in earnings from unconsolidated entities primarily as a result of $22.2 million and $14.7 million share of gains,respectively, from the sale of two operating properties by its unconsolidated entities in each year. 85Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Years Ended November 30,(In thousands)2016 2015 2014Lennar Homebuilding interest expense: Homebuilding East$92,541 94,425 86,744Homebuilding Central48,879 41,280 39,507Homebuilding West87,293 70,397 58,999Homebuilding Other16,348 14,045 16,289Total Lennar Homebuilding interest expense$245,061 220,147 201,539Lennar Financial Services interest income, net$12,388 13,547 6,585Rialto interest expense$40,303 43,127 36,531Depreciation and amortization: Homebuilding East$18,713 16,877 13,899Homebuilding Central10,328 9,881 8,820Homebuilding West19,437 17,683 14,533Homebuilding Other4,562 4,477 5,729Lennar Financial Services7,667 6,100 4,539Rialto7,590 7,758 7,367Lennar Multifamily2,472 1,110 595Corporate and unallocated34,966 23,522 23,641Total depreciation and amortization$105,735 87,408 79,123Net additions to (disposals of) operating properties and equipment: Homebuilding East (1)$(10,379) 316 (42,430)Homebuilding Central2,385 (18) 584Homebuilding West (2)24,438 (11,482) 6,719Homebuilding Other (3)26,727 (72,472) 1,042Lennar Financial Services6,218 3,306 4,502Rialto1,908 9,382 4,361Lennar Multifamily1,666 2,147 1,907Corporate and unallocated12,645 27,466 1,977Total net additions (disposals of) operating properties and equipment$65,608 (41,355) (21,338)Lennar Homebuilding equity in earnings (loss) from unconsolidated entities: Homebuilding East$(230) 118 1,678Homebuilding Central401 75 (10)Homebuilding West (4)(49,731) 62,960 (1,647)Homebuilding Other285 220 (376)Total Lennar Homebuilding equity in earnings (loss) from unconsolidated entities$(49,275) 63,373 (355)Rialto equity in earnings from unconsolidated entities$18,961 22,293 59,277Lennar Multifamily equity in earnings from unconsolidated entities$85,519 19,518 14,454(1)For the year ended November 30, 2014, net disposals of operating properties and equipment included the sale of an operating property with a basis of $44.1 million.(2)For the year ended November 30, 2015, net disposals of operating properties and equipment included the sale of an operating property with a basis of $59.4 million.(3)For the year ended November 30, 2015, net disposals of operating properties and equipment included the sale of an operating property with a basis of $73.3 million.(4)For the year ended November 30, 2016, equity in loss included the Company's share of costs associated with the FivePoint combination (described in Note 4) and operationalnet losses from the new FivePoint unconsolidated entity, totaling $42.6 million, partially offset by $12.7 million of equity in earnings primarily due to sales of homesites tothird parties by one of the Company's unconsolidated entities. For the year ended November 30, 2015, equity in earnings included $82.8 million of equity in earnings from oneof the Company's unconsolidated entities. For the year ended November 30, 2014, Lennar Homebuilding equity in loss from unconsolidated entities related primarily to theCompany's share of operating losses from various Lennar Homebuilding West unconsolidated entities, which included $4.3 million of the Company's share of valuationadjustments related to assets of Lennar Homebuilding's unconsolidated entitie86Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)s, partially offset by $4.7 million of equity in earnings as a result of third-party land sales by one unconsolidated entity. For details refer to Note 4.3. Lennar Homebuilding Receivables November 30,(In thousands)2016 2015Accounts receivable$67,296 41,653Mortgage and notes receivable39,788 22,365Income tax receivables— 10,620 107,084 74,638Allowance for doubtful accounts(108) (100) $106,976 74,538At November 30, 2016 and 2015, Lennar Homebuilding accounts receivable related primarily to other receivables and rebates. The Companyperforms ongoing credit evaluations of its customers and generally does not require collateral for accounts receivable. Mortgages and notes receivable arisingfrom the sale of homes and land are generally collateralized by the property sold to the buyer. Allowances are maintained for potential credit losses based onhistorical experience, present economic conditions and other factors considered relevant by the Company.4. Lennar Homebuilding Investments in Unconsolidated EntitiesSummarized condensed financial information on a combined 100% basis related to Lennar Homebuilding’s unconsolidated entities that areaccounted for by the equity method was as follows:Statements of Operations Years Ended November 30,(In thousands)2016 2015 2014Revenues$439,874 1,309,517 263,395Costs and expenses578,831 969,509 291,993Other income— 49,343 —Net earnings (loss) of unconsolidated entities$(138,957) 389,351 (28,598)Lennar Homebuilding equity in earnings (loss) from unconsolidated entities$(49,275) 63,373 (355)For the year ended November 30, 2016, Lennar Homebuilding equity in loss from unconsolidated entities was primarily attributable to theCompany's share of costs associated with the FivePoint combination and operational net losses from the new FivePoint unconsolidated entity, totaling $42.6million. This was partially offset by $12.7 million of equity in earnings primarily due to sales of homesites to third parties by one of the Company'sunconsolidated entities.For the year ended November 30, 2015, Lennar Homebuilding equity in earnings included $82.8 million of equity in earnings from one of theCompany's unconsolidated entities primarily due to (1) sales of approximately 800 homesites to a joint venture in which the Company has a 50%investment and for which the Company's portion of the gross profit from the sale was deferred, (2) sales of approximately 700 homesites and a commercialproperty to third parties and (3) a gain on debt extinguishment. In addition, for the year ended November 30, 2015, net earnings of unconsolidated entitiesincluded sales of approximately 300 homesites to Lennar by one of the Company's unconsolidated entities that resulted in $49.3 million of gross profit, ofwhich the Company's portion was deferred.For the year ended November 30, 2014, Lennar Homebuilding equity in loss from unconsolidated entities related primarily to the Company's shareof operating losses from various Lennar Homebuilding unconsolidated entities, which included $4.6 million of valuation adjustments related to assets ofLennar Homebuilding's unconsolidated entities, partially offset by $4.7 million of equity in earnings as a result of third-party land sales by oneunconsolidated entity.87Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Balance Sheets November 30,(In thousands)2016 2015Assets: Cash and cash equivalents$221,334 248,980Inventories3,889,795 3,059,054Other assets1,338,302 465,404 $5,449,431 3,773,438Liabilities and equity: Accounts payable and other liabilities$791,245 288,192Debt892,850 792,886Equity3,765,336 2,692,360 $5,449,431 3,773,438On May 2, 2016 (the "Closing Date"), the Company contributed, or obtained the right to contribute, its investment in three strategic joint venturespreviously managed by FivePoint Communities in exchange for an investment in a FivePoint entity. The fair values of the assets contributed to thisFivePoint entity, included within the unconsolidated entities summarized condensed balance sheet presented above, are preliminary and may be adjustedwhen additional information is obtained during the transaction's measurement period (a period of up to one year from the Closing Date) that may change thefair value allocation as of the acquisition date. A portion of the assets of one of the three strategic joint ventures was retained by Lennar and its venturepartner in a new unconsolidated entity. The transactions did not have a material impact to the Company’s financial position or cash flows. The Companyrecorded its share of combination costs in equity in loss from unconsolidated entities on the consolidated statement of operations for the year endedNovember 30, 2016.As of November 30, 2016 and 2015, the Company’s recorded investments in Lennar Homebuilding unconsolidated entities were $811.7 million and$741.6 million, respectively, while the underlying equity in Lennar Homebuilding unconsolidated entities partners’ net assets as of November 30, 2016 and2015 was $1.2 billion and $839.5 million, respectively. The basis difference is primarily as a result of the Company contributing its investment in threestrategic joint ventures with a higher fair value than book value for an investment in the FivePoint entity and deferring equity in earnings on land sales to theCompany.During the year ended November 30, 2015, one of the Company's unconsolidated entities sold approximately 800 homesites to a joint venture, inwhich the Company has a 50% investment, for $472 million of which $320.0 million was financed through a non-recourse note. This transaction resulted in$157.4 million of gross profit, of which the Company's portion was deferred. In addition, this transaction resulted in an increase in inventory, other assets anddebt of the Lennar Homebuilding unconsolidated entities reflected in the summarized condensed financial information presented in the previous table for theyear ended November 30, 2015.The Company’s partners generally are unrelated homebuilders, land owners/developers and financial or other strategic partners. The unconsolidatedentities follow accounting principles that are in all material respects the same as those used by the Company. The Company shares in the profits and losses ofthese unconsolidated entities generally in accordance with its ownership interests. In many instances, the Company is appointed as the day-to-day managerunder the direction of a management committee that has shared powers amongst the partners of the unconsolidated entities and the Company receivesmanagement fees and/or reimbursement of expenses for performing this function. During the years ended November 30, 2016, 2015 and 2014, the Companyreceived management fees and reimbursement of expenses, net of deferrals, from Lennar Homebuilding unconsolidated entities totaling $13.2 million, $31.3million and $30.7 million, respectively.The Company and/or its partners sometimes obtain options or enter into other arrangements under which the Company can purchase portions of theland held by the unconsolidated entities. Option prices are generally negotiated prices that approximate fair value when the Company receives the options.During the years ended November 30, 2016, 2015 and 2014, $130.4 million, $177.6 million and $59.0 million, respectively, of the unconsolidated entities’revenues were from land sales to the Company. The Company does not include in its Lennar Homebuilding equity in earnings (loss) from unconsolidatedentities its pro-rata share of unconsolidated entities’ earnings resulting from land sales to its homebuilding divisions. Instead, the Company accounts forthose earnings as a reduction of the cost of purchasing the land from the unconsolidated entities. This in effect defers recognition of the Company’s share ofthe unconsolidated entities’ earnings related to these sales until the Company delivers a home and title passes to a third-party homebuyer.88Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)The Lennar Homebuilding entities in which the Company has investments usually finance their activities with a combination of partner equity anddebt financing. In some instances, the Company and its partners have guaranteed debt of certain unconsolidated entities.The total debt of the Lennar Homebuilding unconsolidated entities in which the Company has investments was as follows: November 30,(Dollars in thousands)2016 2015Non-recourse bank debt and other debt (partner’s share of several recourse)$48,945 50,411Non-recourse land seller debt and other debt (1)323,995 324,000Non-recourse debt with completion guarantees147,100 146,760Non-recourse debt without completion guarantees320,372 260,734Non-recourse debt to the Company840,412 781,905The Company’s maximum recourse exposure (2)52,438 10,981Total debt$892,850 792,886The Company’s maximum recourse exposure as a % of total JV debt6% 1%(1)Non-recourse land seller debt and other debt as of both November 30, 2016 and 2015, included a $320 million non-recourse note related to a transaction between one of theCompany's unconsolidated entities and another unconsolidated joint venture, described previously, which was settled subsequent to November 30, 2016.(2)As of November 30, 2016, the Company's maximum recourse exposure was primarily related to the Company providing a repayment guarantee on an unconsolidated entity'sdebt.In most instances in which the Company has guaranteed debt of a Lennar Homebuilding unconsolidated entity, the Company’s partners have alsoguaranteed that debt and are required to contribute their share of the guarantee payments. In a repayment guarantee, the Company and its venture partnersguarantee repayment of a portion or all of the debt in the event of default before the lender would have to exercise its rights against the collateral.In connection with many of the loans to Lennar Homebuilding unconsolidated entities, the Company and its joint venture partners (or entitiesrelated to them) have been required to give guarantees of completion to the lenders. Those completion guarantees may require that the guarantors completethe construction of the improvements for which the financing was obtained. If the construction is to be done in phases, the guarantee generally is limited tocompleting only the phases as to which construction has already commenced and for which loan proceeds were used.If the Company is required to make a payment under any guarantee, the payment would constitute a capital contribution or loan to the LennarHomebuilding unconsolidated entity and increase the Company's investment in the unconsolidated entity and its share of any funds the entity distributes.As of both November 30, 2016 and 2015, the fair values of the repayment guarantees and completion guarantees were not material. The Companybelieves that as of November 30, 2016, in the event it becomes legally obligated to perform under a guarantee of the obligation of a Lennar Homebuildingunconsolidated entity due to a triggering event under a guarantee, most of the time the collateral should be sufficient to repay at least a significant portion ofthe obligation or the Company and its partners would contribute additional capital into the venture. In certain instances, the Company has placedperformance letters of credit and surety bonds with municipalities for its joint ventures (see Note 6).89Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)5. Lennar Homebuilding Operating Properties and EquipmentOperating properties and equipment are included in Lennar Homebuilding other assets in the consolidated balance sheets and were as follows: November 30,(In thousands)2016 2015Operating properties (1)$151,461 93,174Leasehold improvements40,513 34,064Furniture, fixtures and equipment68,579 66,670 260,553 193,908Accumulated depreciation and amortization(86,939) (78,351) $173,614 115,557(1)Operating properties primarily include rental operations and commercial properties. During the year ended November 30, 2015, the Company sold operating properties with abasis of $132.7 million.6. Lennar Homebuilding Senior Notes and Other Debts Payable November 30,(Dollars in thousands)2016 201512.25% senior notes due 2017$398,232 396,2524.75% senior notes due December 2017398,479 397,7366.95% senior notes due 2018248,474 247,6324.125% senior notes due December 2018273,889 273,3194.500% senior notes due 2019498,002 497,2104.50% senior notes due 2019597,474 596,6224.750% senior notes due 2021496,547 —4.750% senior notes due 2022568,404 567,3254.875% senior notes due December 2023394,170 393,5454.750% senior notes due 2025496,226 495,7846.50% senior notes due 2016— 249,9052.75% convertible senior notes due 2020— 233,2253.25% convertible senior notes due 2021— 398,194Mortgage notes on land and other debt206,080 278,381 $4,575,977 5,025,130The carrying amounts of the senior notes listed above are net of debt issuance costs of $22.1 million and $26.4 million, as of November 30, 2016and 2015, respectively.In June 2016, the Company amended the credit agreement governing its unsecured revolving credit facility (the "Credit Facility") to increase themaximum borrowings from $1.6 billion to $1.8 billion. The maturity for $1.3 billion of the Credit Facility was extended from June 2019 to June 2020, withthe remaining $160 million maturing in June 2018. As of November 30, 2016, the Credit Facility included a $298 million accordion feature, subject toadditional commitments, with certain financial institutions. The proceeds available under the Credit Facility, which are subject to specified conditions forborrowing, may be used for working capital and general corporate purposes. The credit agreement also provides that up to $500 million in commitments maybe used for letters of credit. As of both November 30, 2016 and 2015, the Company had no outstanding borrowings under the Credit Facility. Under theCredit Facility agreement, the Company is required to maintain a minimum consolidated tangible net worth, a maximum leverage ratio and either a liquidityor an interest coverage ratio. These ratios are calculated per the Credit Facility agreement, which involves adjustments to GAAP financial measures. TheCompany believes it was in compliance with its debt covenants at November 30, 2016. In addition, the Company had $320 million letter of credit facilitieswith different financial institutions at November 30, 2016.90Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)The Company’s performance letters of credit outstanding were $270.8 million and $236.5 million at November 30, 2016 and 2015, respectively.The Company’s financial letters of credit outstanding were $210.3 million and $216.7 million at November 30, 2016 and 2015, respectively. Performanceletters of credit are generally posted with regulatory bodies to guarantee the Company’s performance of certain development and construction activities.Financial letters of credit are generally posted in lieu of cash deposits on option contracts, for insurance risks, credit enhancements and as other collateral.Additionally, at November 30, 2016, the Company had outstanding surety bonds of $1.4 billion including performance surety bonds related to siteimprovements at various projects (including certain projects of the Company’s joint ventures) and financial surety bonds including $223.4 million related topending litigation. Although significant development and construction activities have been completed related to these site improvements, these bonds aregenerally not released until all development and construction activities are completed. As of November 30, 2016, there were approximately $488.9 million,or 42%, of anticipated future costs to complete related to these site improvements. The Company does not presently anticipate any draws upon these bonds orletters of credit, but if any such draws occur, the Company does not believe they would have a material effect on its financial position, results of operations orcash flows.The terms of each of the Company's senior notes outstanding at November 30, 2016 were as follows:Senior Notes Outstanding (1) PrincipalAmount Net Proceeds(2) Price Dates Issued(Dollars in thousands) 12.25% senior notes due 2017 $400,000 $386,700 98.098% April 20094.75% senior notes due December 2017 400,000 395,900 100% July 2012, August 20126.95% senior notes due 2018 250,000 243,900 98.929% May 20104.125% senior notes due December 2018 275,000 271,718 99.998% February 20134.500% senior notes due 2019 500,000 495,725 (3) February 20144.50% senior notes due 2019 600,000 595,801 (4) November 2014, February 20154.750% senior notes due 2021 500,000 495,974 100% March 20164.750% senior notes due 2022 575,000 567,585 (5) October 2012, February 2013, April 20134.875% senior notes due December 2023 400,000 393,622 99.169% November 20154.750% senior notes due 2025 500,000 495,528 100% April 2015(1)Interest is payable semi-annually for each of the series of senior notes. The senior notes are unsecured and unsubordinated, but are guaranteed by substantially all of theCompany's 100% owned homebuilding subsidiaries.(2)The Company generally uses the net proceeds for working capital and general corporate purposes, which can include the repayment or repurchase of other outstanding seniornotes.(3)The Company issued $400 million aggregate principal amount at a price of 100% and $100 million aggregate principal amount at a price of 100.5%.(4)The Company issued $350 million aggregate principal amount at a price of 100% and $250 million aggregate principal amount at a price of 100.25%.(5)The Company issued $350 million aggregate principal amount at a price of 100%, $175 million aggregate principal amount at a price of 98.073% and $50 million aggregateprincipal amount at a price of 98.250%.In March 2016, the Company retired its 6.50% senior notes due April 2016 (the "6.50% Senior Notes") for 100% of the $250 million outstandingprincipal amount, plus accrued and unpaid interest.During the year ended November 30, 2016, all of the $400 million aggregate principal amount of the 3.25% convertible senior notes due 2021 (the"3.25% Convertible Senior Notes") were converted or redeemed for 17.0 million shares of Class A common stock, plus accrued and unpaid interest throughthe date of the conversions/redemptions and small cash premiums. The 3.25% Convertible Senior Notes were converted at the initial conversion rate of42.5555 shares of Class A common stock per $1,000 principal amount of the 3.25% Convertible Senior Notes, which is equivalent to an initial conversionprice of approximately $23.50 per share of Class A common stock. For the year ended November 30, 2016, the calculation of diluted earnings per shareincluded 11.9 million shares related to the dilutive effect of the 3.25% Convertible Senior Notes. For both the years ended November 30, 2015 and 2014, thecalculation of diluted earnings per share included 17.0 million shares related to the dilutive effect of the 3.25% Convertible Senior Notes.91Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)During the year ended November 30, 2016, all of the remaining $234 million aggregate outstanding principal amount of the 2.75% convertiblesenior notes due December 2020 (the "2.75% Convertible Senior Notes") were converted or exchanged by the holders for approximately $234 million in cashand 5.2 million shares of Class A common stock, plus accrued and unpaid interest with respect to the exchanges. The 2.75% Convertible Senior Notes wereconvertible into cash, shares of Class A common stock or a combination of both, at the Company’s election. However, the Company settled the face value ofthe 2.75% Convertible Senior Notes in cash. Holders converted or exchanged the 2.75% Convertible Senior Notes at the initial conversion rate of 45.1794shares of Class A common stock per $1,000 principal amount, which was equivalent to an initial conversion price of approximately $22.13 per share ofClass A common stock. For the years ended November 30, 2016, 2015 and 2014, the calculation of diluted earnings per share included 0.4 million shares, 8.6million shares and 9.0 million shares, respectively, related to the dilutive effect of the 2.75% Convertible Senior Notes.Subsequent to November 30, 2016, the Company issued $600 million aggregate principal amount of 4.125% senior notes due 2022 (the "4.125%Senior Notes") at a price of 100%. Proceeds from the offering, after underwriting fees but before expenses, are estimated to be $596.1 million. The Companywill use the net proceeds from the sales of the 4.125% Senior Notes to fund all or a portion of the cash consideration for the Company's acquisition of WCICommunities, Inc. ("WCI"), to pay related costs and expenses related to the acquisition of WCI and/or for general corporate purposes, which may include therepayment or repurchase of the Company's debt. Interest on the 4.125% Senior Notes is due semi-annually beginning July 15, 2017. The 4.125% SeniorNotes are unsecured and unsubordinated, but are guaranteed by substantially all of the Company's 100% owned homebuilding subsidiaries.The Company's senior notes are guaranteed by substantially all of the Company's 100% owned homebuilding subsidiaries and some of theCompany's other subsidiaries. Although the guarantees are full, unconditional and joint and several while they are in effect, (i) a subsidiary will cease to be aguarantor at any time when it is not directly or indirectly guaranteeing at least $75 million of debt of Lennar Corporation (the parent company), and (ii) asubsidiary will be released from its guarantee and any other obligations it may have regarding the senior notes if all or substantially all its assets, or all of itscapital stock, are sold or otherwise disposed of.At November 30, 2016, the Company had mortgage notes on land and other debt due at various dates through 2031 bearing interest at rates up to7.5% with an average interest rate of 3.1%. At November 30, 2016 and 2015, the carrying amount of the mortgage notes on land and other debt was $206.1million and $278.4 million, respectively. During the years ended November 30, 2016 and 2015, the Company retired $211.0 million and $258.1 million,respectively, of mortgage notes on land and other debt.The minimum aggregate principal maturities of senior notes and other debts payable during the five years subsequent to November 30, 2016 andthereafter are as follows:(In thousands)DebtMaturities2017$478,3332018695,20820191,383,12120204,3962021519,322Thereafter1,524,950The Company expects to pay its near-term maturities as they come due through cash generated from operations, the issuance of additional debt orequity offerings as well as borrowings under the Company's Credit Facility.92Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)7. Lennar Financial Services SegmentThe assets and liabilities related to the Lennar Financial Services segment were as follows: November 30,(In thousands)2016 2015Assets: Cash and cash equivalents$123,964 106,777Restricted cash17,053 13,961Receivables, net (1)409,528 242,808Loans held-for-sale (2)939,405 843,252Loans held-for-investment, net30,004 30,998Investments held-to-maturity41,991 40,174Investments available-for-sale (3)53,570 42,827Goodwill39,838 38,854Other (4)99,319 66,186 $1,754,672 1,425,837Liabilities: Notes and other debts payable$1,077,228 858,300Other (5)241,055 225,678 $1,318,283 1,083,978(1)Receivables, net, primarily related to loans sold to investors for which the Company had not yet been paid as of November 30, 2016 and 2015, respectively.(2)Loans held-for-sale related to unsold loans carried at fair value.(3)Investments available-for-sale are carried at fair value with changes in fair value recorded as a component of accumulated other comprehensive income (loss).(4)As of November 30, 2016 and 2015, other assets included mortgage loan commitments carried at fair value of $7.4 million and $13.1 million, respectively, and mortgageservicing rights carried at fair value of $23.9 million and $16.8 million, respectively. In addition, other assets also included forward contracts carried at fair value of $26.5million and $0.5 million as of November 30, 2016 and November 30, 2015, respectively.(5)As of November 30, 2016 and 2015, other liabilities included $57.4 million and $65.0 million, respectively, of certain of the Company’s self-insurance reserves related toconstruction defects, general liability and workers’ compensation.At November 30, 2016, the Lennar Financial Services segment warehouse facilities were as follows:(In thousands)Maximum AggregateCommitment364-day warehouse repurchase facility that matures December 2016 (1)(2)$400,000364-day warehouse repurchase facility that matures June 2017 (3)600,000364-day warehouse repurchase facility that matures September 2017300,000Total$1,300,000(1)Maximum aggregate commitment includes an uncommitted amount of $250 million.(2)Subsequent to November 30, 2016, the warehouse repurchase facility maturity date was extended to December 2017.(3)In accordance with the amended warehouse repurchase facility agreement, the maximum aggregate commitment will be decreased to $400 million in the first quarter of fiscal2017 and will be increased to $600 million in the second quarter of fiscal 2017.The Lennar Financial Services segment uses these facilities to finance its lending activities until the mortgage loans are sold to investors and theproceeds are collected. The facilities are non-recourse to the Company and are expected to be renewed or replaced with other facilities when they mature.Borrowings under the facilities and their prior year predecessors were $1.1 billion and $858.3 million at November 30, 2016 and 2015, respectively, and werecollateralized by mortgage loans and receivables on loans sold to investors but not yet paid for with outstanding principal balances of $1.1 billion and$916.9 million at November 30, 2016 and 2015, respectively. The combined effective interest rate on the facilities at November 30, 2016 was 2.9%. If thefacilities are not renewed or replaced, the borrowings under the lines of credit will be paid off by selling the mortgage loans held-for-sale to investors and bycollecting on receivables on loans sold but not yet paid. Without the facilities, the Lennar Financial Services segment would have to use cash fromoperations and other funding sources to finance its lending activities.93Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)8. Rialto SegmentThe assets and liabilities related to the Rialto segment were as follows: November 30,(In thousands)2016 2015Assets: Cash and cash equivalents$148,827 150,219Restricted cash9,935 15,061Receivables, net (1)204,518 154,948Loans held-for-sale (2)126,947 316,275Loans receivable, net111,608 164,826Real estate owned - held-for-sale160,344 183,052Real estate owned - held-and-used, net83,359 153,717Investments in unconsolidated entities245,741 224,869Investments held-to-maturity71,260 25,625Other113,671 116,908 $1,276,210 1,505,500Liabilities: Notes and other debts payable$622,335 771,728Other85,645 94,496 $707,980 866,224(1)Receivables, net primarily related to loans sold but not settled as of November 30, 2016 and 2015.(2)Loans held-for-sale related to unsold loans originated by RMF carried at fair value.For the years ended November 30, 2016, 2015 and 2014, Rialto costs and expenses included loan impairments of $18.2 million, $10.4 million and$57.1 million, respectively, primarily associated with the segment's FDIC loans portfolio (before noncontrolling interests). For the years ended November 30,2016, 2015 and 2014, Rialto operating earnings included net earnings (loss) attributable to noncontrolling interests of ($18.8) million, $4.8 million and($22.5) million, respectively.The following is a detail of Rialto other income (expense), net: Years Ended November 30,(In thousands)2016 2015 2014Realized gains on REO sales, net$17,495 35,242 43,671Unrealized losses on transfer of loans receivable to REO and impairments, net(23,087) (13,678) (26,107)REO and other expenses(54,008) (57,740) (58,067)Rental and other income (1)19,750 48,430 43,898Rialto other income (expense), net$(39,850) 12,254 3,395(1)Rental and other income for the year ended November 30, 2016, included a $16.0 million write-off of uncollectible receivables related to a hospital, which was acquiredthrough the resolution of one of Rialto's loans from a 2010 portfolio. The hospital is managed by a third-party management company.Loans ReceivableThe following table represents loans receivable, net by type: November 30,(In thousands)2016 2015Nonaccrual loans: FDIC and Bank Portfolios$47,122 88,694Accrual loans64,486 76,132Loans receivable, net$111,608 164,82694Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)The nonaccrual loan portfolios consist primarily of loans acquired at a discount. In 2010, the Rialto segment acquired indirectly 40% managingmember equity interests in two limited liability companies in partnership with the FDIC ("FDIC Portfolios"). The LLCs met the accounting definition of VIEsand since the Company was determined to be the primary beneficiary, the Company consolidated the LLCs. The Company was determined to be the primarybeneficiary because it has the power to direct the activities of the LLCs that most significantly impact the LLCs' performance through Rialto's managementand servicer contracts. At November 30, 2016 and 2015, these consolidated LLCs had total combined assets of $213.8 million and $355.2 million,respectively, and liabilities of $10.3 million and $11.3 million, respectively.In addition, in 2010 Rialto acquired 400 distressed residential and commercial real estate loans ("Bank Portfolios") and over 300 REO propertiesfrom three financial institutions.Based on the nature of these loans, the portfolios are managed by assessing the risks related to the likelihood of collection of payments fromborrowers and guarantors, as well as monitoring the value of the underlying collateral. As of November 30, 2016 and 2015, management classified all loansreceivable within the FDIC Portfolios and Bank Portfolios as nonaccrual loans as forecasted principal and interest cannot be reasonably estimated, andtherefore, the Company accounts for these assets in accordance with ASC 310-10, Receivables.As of November 30, 2016, accrual loans included floating and fixed rate commercial property loans maturing between October 2017 and June 2018.Accrual loans as of November 30, 2015 included $17.1 million of convertible land loans that matured and were settled in July 2016 and $59.1 million offloating and fixed rate commercial property loans that were maturing between May 2016 and July 2018.The following tables represent nonaccrual loans in the FDIC Portfolios and Bank Portfolios accounted for under ASC 310-10 aggregated bycollateral type:November 30, 2016 Recorded Investment (In thousands)Unpaid PrincipalBalance WithAllowance WithoutAllowance Total RecordedInvestmentLand$86,076 30,157 2,273 32,430Single family homes17,314 2,835 2,348 5,183Commercial properties9,949 1,015 — 1,015Other50,676 259 8,235 8,494Nonaccrual loans$164,015 34,266 12,856 47,122November 30, 2015 Recorded Investment (In thousands)Unpaid PrincipalBalance WithAllowance WithoutAllowance Total RecordedInvestmentLand$145,417 59,740 1,165 60,905Single family homes39,659 8,344 3,459 11,803Commercial properties13,458 1,368 1,085 2,453Other78,279 — 13,533 13,533Nonaccrual loans$276,813 69,452 19,242 88,694The average recorded investment in impaired loans totaled approximately $68 million and $109 million for the years ended November 30, 2016 and2015, respectively.In order to assess the risk associated with each risk category, management evaluates the forecasted cash flows and the value of the underlyingcollateral securing the loans receivable on a quarterly basis or when an event occurs that suggests a decline in the collateral’s fair value.95Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Allowance for Loan LossesThe allowance for loan losses is a valuation reserve established through provisions for loan losses charged against Rialto’s operating earnings. Fornonaccrual loans, the risk relates to a decline in the value of the collateral securing the outstanding obligation. If the recorded investment in the nonaccrualloan exceeds its fair value, an impairment is recognized through an allowance for loan losses. The activity in the Company's allowance rollforward related tononaccrual loans was as follows: November 30,(In thousands)2016 2015Allowance on nonaccrual loans, beginning of year$35,625 58,326Provision for loan losses18,229 10,363Charge-offs(23,627) (33,064)Allowance on nonaccrual loans, end of year$30,227 35,625For accrual loans an allowance is calculated based on a review of individual loans considered impaired. The analysis of impaired losses may be basedon the present value of expected future cash flows discounted at the effective loan rate, an observable market price or the fair value of the underlyingcollateral on collateral dependent loans. In determining the collectability of certain loans, management also considers the fair value of any underlyingcollateral. Based on management's assessment, no allowance for loan losses were recorded for Rialto's accrual loans as of November 30, 2016 and 2015,respectively.Real Estate OwnedThe acquisition of properties acquired through, or in lieu of, loan foreclosure are reported within the consolidated balance sheets as REO held-and-used, net and REO held-for-sale.The following tables present the activity in REO: November 30,(In thousands)2016 2015REO - held-for-sale, beginning of year$183,052 190,535Improvements3,006 5,535Sales(80,153) (120,053)Impairments and unrealized losses(25,153) (12,192)Transfers to/from held-and-used, net (1)79,592 119,227REO - held-for-sale, end of year$160,344 183,052 November 30,(In thousands)2016 2015REO - held-and-used, net, beginning of year$153,717 255,795Additions13,772 20,134Improvements(1,100) 2,942Impairments(1,819) (2,624)Depreciation(1,619) (2,339)Transfers to held-for-sale (1)(79,592) (119,227)Other— (964)REO - held-and-used, net, end of year$83,359 153,717(1)During the years ended November 30, 2016 and 2015, the Rialto segment transferred certain properties to/from REO held-and-used, net to REO held-for-sale as a result ofchanges made in the disposition strategy of the real estate assets.For the years ended November 30, 2016, 2015 and 2014, the Company recorded net gains (losses) of $1.3 million, ($1.3) million and ($6.8) million,respectively, from acquisitions of REO through foreclosure. These net gains (losses) are recorded in Rialto other income (expense), net.96Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Rialto Mortgage Finance - loans held-for-saleDuring the year ended November 30, 2016, RMF originated loans with a total principal balance of $1.8 billion, of which $1.7 billion were recordedas loans held-for-sale and $81.2 million were recorded as accrual loans within loans receivable, net, and sold $1.9 billion of loans into 11 separatesecuritizations. During the year ended November 30, 2015, RMF originated loans with a principal balance of $2.7 billion of which $2.6 billion were recordedas loans held-for-sale and $62.3 million were recorded as accrual loans within loans receivable, net, and sold $2.4 billion of loans into 12 separatesecuritizations. As of November 30, 2016 and 2015, originated loans with an unpaid principal balance of $199.8 million and $151.8 million, respectively,were sold into a securitization trust but not settled and thus were included as receivables, net.Notes and Other Debts PayableThe Rialto segment has $350 million aggregate principal amount of the 7.00% senior notes due 2018 (the "7.00% Senior Notes"). Interest on the7.00% Senior Notes is due semi-annually. As of November 30, 2016 and 2015, the carrying amount, net of debt issuance costs, of the 7.00% Senior Notes was$348.7 million and $347.9 million, respectively. Under the indenture, Rialto is subject to certain covenants limiting, among other things, Rialto’s ability toincur indebtedness, to make investments, to make distributions to, or enter into transactions with, Lennar or to create liens, subject to certain exceptions andqualifications. Rialto also has quarterly and annual reporting requirements, similar to an SEC registrant, to holders of the 7.00% Senior Notes. The Companybelieves Rialto was in compliance with its debt covenants at November 30, 2016.At November 30, 2016, Rialto warehouse facilities were as follows:(In thousands)Maximum AggregateCommitment364-day warehouse repurchase facility that matures April 2017 (1)(2)$500,000364-day warehouse repurchase facility that matures January 2017 (1)250,000Warehouse repurchase facility that matures December 2017 (1)200,000Warehouse repurchase facility that matures August 2018 (two - one year extensions) (3)100,000Totals$1,050,000(1)RMF uses these facilities to finance its loan origination and securitization activities.(2)The warehouse repurchase facility has the option of an additional six month extension.(3)Rialto uses this warehouse repurchase facility to finance the origination of floating rate accrual loans which are reported as accrual loans within loans receivable, net.Borrowings under this facility were $43.3 million and $36.3 million as of November 30, 2016 and 2015, respectively.Borrowings under the facilities that finance RMF's loan originations and securitization activities were $180.2 million and $317.1 million as ofNovember 30, 2016 and 2015, respectively, and were secured by a 75% interest in the originated commercial loans financed. The facilities require immediaterepayment of the 75% interest in the secured commercial loans when the loans are sold in a securitization and the proceeds are collected. These warehouserepurchase facilities are non-recourse to the Company and are expected to be renewed or replaced with other facilities when they mature.In November 2016, Rialto paid the remaining outstanding principal amount of $30.3 million related to a $124 million senior unsecured noteprovided by one of the selling institutions in the Bank Portfolios and REO properties transaction.In 2014, Rialto issued two notes with a principal amount of $94.7 million through structured note offerings (the "Structured Notes") at a price of100% and 99.5%, respectively, with annual coupon rates of 2.85%. and 5.00%, respectively, and collateralized by certain assets originally acquired in theBank Portfolios. As of November 30, 2016 and 2015, the remaining outstanding principal amount, net of debt issuance costs, related to the Structured Noteswas $23.9 million and $31.3 million, respectively and the estimated final payment date is December 15, 2017.InvestmentsGenerally, all of Rialto's investments in funds have the attributes of an investment company in accordance with ASC 946, Financial Services –Investment Companies, as amended by ASU 2013-08, Financial Services - Investment Companies (Topic 946): Amendments to the Scope, Measurement, andDisclosure Requirements, the attributes of which are different from the attributes that would cause a company to be an investment company for purposes ofthe Investment Company Act of 1940. As a result, the assets and liabilities of the funds in which Rialto has investments in are recorded at fair value withincreases/decreases in fair value recorded in their respective statements of operations and the Company’s share recorded in Rialto equity in earnings fromunconsolidated entities in the Company's statement of operations.97Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)The following table reflects Rialto's investments in funds that invest in and manage real estate related assets and other investments: November 30, 2016 November 30, 2016 November 30, 2015(Dollars in thousands)InceptionYear EquityCommitments EquityCommitmentsCalled Commitment toFund by theCompany Funds Contributedby the Company InvestmentRialto Real Estate Fund, LP2010 $700,006 $700,006 $75,000 $75,000 $58,116 68,570Rialto Real Estate Fund II, LP2012 1,305,000 1,305,000 100,000 100,000 96,192 99,947Rialto Mezzanine Partners Fund, LP2013 300,000 300,000 33,799 33,799 23,643 32,344Rialto Capital CMBS Funds2014 119,174 119,174 52,474 52,474 50,519 23,233Rialto Real Estate Fund III2015 1,289,180 128,871 100,000 7,239 9,093 —Rialto Credit Partnership, LP2016 220,000 63,150 19,999 5,741 5,794 —Other investments 2,384 775 $245,741 224,869Rialto's share of earnings (loss) from unconsolidated entities was as follows: Years Ended November 30,(In thousands)2016 2015 2014Rialto Real Estate Fund, LP$3,205 9,676 30,612Rialto Real Estate Fund II, LP9,054 7,440 15,929Rialto Mezzanine Partners Fund, LP2,944 2,194 1,913Rialto Capital CMBS Funds1,805 3,013 10,823Rialto Real Estate Fund III (1)1,932 (78) —Rialto Credit Partnership, LP54 — —Other investments(33) 48 —Rialto equity in earnings from unconsolidated entities$18,961 22,293 59,277(1)Equity in loss from Fund III for the year ended November 30, 2015 related to formation costs incurred in November 2015.During the years ended November 30, 2016, 2015 and 2014, Rialto received $10.1 million, $20.0 million and $34.7 million, respectively, ofadvance distributions with regard to Rialto's carried interests in its real estate funds in order to cover income tax obligations resulting from allocations oftaxable income to Rialto's carried interests in these funds. These advance distributions are not subject to clawbacks and therefore are included in Rialto'srevenues.During 2015, Rialto adopted a Carried Interest Incentive Plan (the "Plan"), under which participating employees in the aggregate may receive up to40% of the equity units of a limited liability company (a "Carried Interest Entity") that is entitled to distributions made by a fund or other investment vehicle(a "Fund") managed by a subsidiary of Rialto. As such, those employees receiving equity units in a Carried Interest Entity may benefit from distributionsmade by a Fund to the extent the Carried Interest Entity makes distributions to its equity holders. The units issued to employees are equity awards and aresubject to vesting schedules and forfeiture or repurchase provisions in the case of a termination of employment.98Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Summarized condensed financial information on a combined 100% basis related to Rialto’s investments in unconsolidated entities that areaccounted for by the equity method was as follows:Balance Sheets November 30,(In thousands)2016 2015Assets: Cash and cash equivalents$230,229 188,147Loans receivable406,812 473,997Real estate owned439,191 506,609Investment securities1,379,155 1,092,476Investments in partnerships398,535 429,979Other assets31,902 30,340 $2,885,824 2,721,548Liabilities and equity: Accounts payable and other liabilities$36,131 29,462Notes payable535,130 374,498Equity2,314,563 2,317,588 $2,885,824 2,721,548Statements of Operations Years Ended November 30,(In thousands)2016 2015 2014Revenues$200,346 170,921 150,452Costs and expenses96,343 97,162 95,629Other income, net (1)49,342 144,941 479,929Net earnings of unconsolidated entities$153,345 218,700 534,752Rialto equity in earnings from unconsolidated entities$18,961 22,293 59,277(1)Other income, net included realized and unrealized gains (losses) on investments.At November 30, 2016 and 2015, the carrying value of Rialto's non-investment grade commercial mortgage-backed securities ("CMBS") was $71.3million and $25.6 million, respectively. These securities were purchased at discount rates ranging from 39% to 72% with coupon rates ranging from 1.3% to4.0%, stated and assumed final distribution dates between November 2020 and November 2026, and stated maturity dates between November 2048 andMarch 2059. The Rialto segment reviews changes in estimated cash flows periodically to determine if an other-than-temporary impairment has occurred onits CMBS. Based on management’s assessment, no impairment charges were recorded during any of the years ended November 30, 2016, 2015 and 2014. TheRialto segment classified these securities as held-to-maturity based on its intent and ability to hold the securities until maturity.In 2014, the Rialto segment invested $18 million in a private commercial real estate services company. The investment was carried at cost atNovember 30, 2016 and 2015 and is included in Rialto's other assets.99Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)9. Lennar Multifamily SegmentThe Company is actively involved, primarily through unconsolidated entities, in the development, construction and property management ofmultifamily rental properties. The Lennar Multifamily segment focuses on developing a geographically diversified portfolio of institutional qualitymultifamily rental properties in select U.S. markets.The assets and liabilities related to the Lennar Multifamily segment were as follows: November 30,(In thousands)2016 2015Assets: Cash and cash equivalents$6,600 8,041Receivables (1)58,929 33,480Land under development139,713 115,982Consolidated inventory not owned— 5,508Investments in unconsolidated entities318,559 250,876Other assets2,330 1,465 $526,131 415,352Liabilities: Accounts payable and other liabilities$117,973 62,943Liabilities related to consolidated inventory not owned— 4,007 $117,973 66,950(1)Receivables primarily related to general contractor services and management fee income receivables as of November 30, 2016 and 2015.The unconsolidated entities in which the Lennar Multifamily segment has investments usually finance their activities with a combination of partnerequity and debt financing. In connection with many of the loans to Lennar Multifamily unconsolidated entities, the Company (or entities related to them) hasbeen required to give guarantees of completion and cost over-runs to the lenders and partners. Those completion guarantees may require that the guarantorscomplete the construction of the improvements for which the financing was obtained. If the construction is to be done in phases, the guarantee generally islimited to completing only the phases as to which construction has already commenced and for which loan proceeds were used. Additionally, the Companyguarantees the construction costs of the project as construction cost over-runs would be paid by the Company. Generally, these payments would be increasesto the Company's investment in the entities and would increase its share of funds the entities distribute after the achievement of certain thresholds. As of bothNovember 30, 2016 and 2015, the fair value of the completion guarantees was immaterial. Additionally, as of November 30, 2016 and 2015, the LennarMultifamily segment had $32.0 million and $37.9 million, respectively, of letters of credit outstanding primarily for credit enhancements for the bank debt ofcertain of its unconsolidated entities and deposits on land purchase contracts. These letters of credit outstanding are included in the disclosure in Note 6related to the Company's performance and financial letters of credit. As of November 30, 2016 and 2015, the Lennar Multifamily segment's unconsolidatedentities had non-recourse debt with completion guarantees of $589.4 million and $466.7 million, respectively.In many instances, the Lennar Multifamily segment is appointed as the construction, development and property manager of certain of its LennarMultifamily unconsolidated entities and receives fees for performing this function. During the years ended November 30, 2016, 2015 and 2014, the LennarMultifamily segment received fee income, net of deferrals, from its unconsolidated entities of $38.5 million, $27.2 million and $13.5 million, respectively.The Lennar Multifamily segment also provides general contractor services for construction of some of the rental properties owned byunconsolidated entities in which the Company has investments. During the years ended November 30, 2016, 2015 and 2014, the Lennar Multifamilysegment provided general contractor services, net of deferrals, totaling $237.1 million, $142.7 million and $50.9 million, respectively, which were partiallyoffset by costs related to those services of $228.6 million, $138.6 million and $49.0 million, respectively.In 2015, the Lennar Multifamily segment completed the initial closing of the Lennar Multifamily Venture (the "Venture") for the development,construction and property management of class-A multifamily assets with $1.1 billion of commitments. During the year ended November 30, 2016, theVenture received an additional $1.1 billion of equity commitments completing the fund raising for the Venture and increasing its total commitments to $2.2billion, including a $504 million co-investment commitment by Lennar comprised of cash, undeveloped land and preacquisition costs. During the yearended November 30, 2016, $656.1 million in equity commitments were called, of which the Company contributed its portion of $203.8 million. During theyear ended November 30, 2016, the Company received net distributions of $113.7 million as return100Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)of capital from the Venture when bringing new investors into the Venture. As of November 30, 2016, $931.6 million of the $2.2 billion in equitycommitments had been called, of which the Company has contributed $215.8 million representing its pro-rata portion of the called equity, resulting in aremaining equity commitment for the Company of $288.2 million. As of November 30, 2016 and 2015, the carrying value of the Company's investment inthe Venture was $198.2 million and $122.5 million, respectively.Summarized condensed financial information on a combined 100% basis related to Lennar Multifamily's investments in unconsolidated entities thatare accounted for by the equity method was as follows:Balance Sheets November 30,(In thousands)2016 2015Assets: Cash and cash equivalents$43,658 39,579Operating properties and equipment2,210,627 1,398,244Other assets46,015 25,925 $2,300,300 1,463,748Liabilities and equity: Accounts payable and other liabilities$196,617 179,551Notes payable589,397 466,724Equity1,514,286 817,473 $2,300,300 1,463,748Statements of Operations Years Ended November 30,(In thousands)2016 2015 2014Revenues$45,287 16,309 4,855Costs and expenses68,976 27,190 7,435Other income, net191,385 43,340 35,068Net earnings of unconsolidated entities$167,696 32,459 32,488Lennar Multifamily equity in earnings from unconsolidated entities (1)$85,519 19,518 14,454(1)During the year ended November 30, 2016, Lennar Multifamily equity in earnings from unconsolidated entities included the segment's $91.0 million share of gains as a resultof the sale of seven operating properties by its unconsolidated entities. During the years ended November 30, 2015 and 2014, Lennar Multifamily equity in earnings fromunconsolidated entities included the segment's $22.2 million and $14.7 million share of gains, respectively, as a result of the sale of two operating properties each year by itsunconsolidated entities.10. Income TaxesThe benefit (provision) for income taxes consisted of the following: Years Ended November 30,(In thousands)2016 2015 2014Current: Federal$(300,116) (343,635) (261,306)State(19,777) (52,420) 3,340 $(319,893) (396,055) (257,966)Deferred: Federal$(43,775) 12,872 (42,847)State(53,710) (7,233) (40,278) (97,485) 5,639 (83,125) $(417,378) (390,416) (341,091)101Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)A reconciliation of the statutory rate and the effective tax rate was as follows: Percentage of Pretax Income 2016 2015 2014Statutory rate35.00 % 35.00 % 35.00 %State income taxes, net of federal income tax benefit3.21 3.22 3.17Domestic production activities deduction(2.78) (3.01) (2.81)Tax reserves and interest expense(0.89) 2.64 0.59Deferred tax asset valuation reversal(0.01) (0.09) (0.28)State net operating loss adjustment (1)— (3.00) —Tax credits(3.46) (1.92) (0.41)Other0.33 (0.12) (0.46)Effective rate31.40% 32.72% 34.80%(1)During the year ended November 30, 2015, the Company recorded a benefit for additional state net operating loss carryforwards as a result of the conclusion of a state taxexamination.Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financialreporting purposes and the amounts used for income tax purposes. The tax effects of significant temporary differences that give rise to the net deferred taxassets were as follows: November 30,(In thousands)2016 2015Deferred tax assets: Inventory valuation adjustments$56,733 58,902Reserves and accruals198,270 197,980Net operating loss carryforwards92,362 122,573Rialto investments in partnerships11,352 —Capitalized expenses106,270 91,873Investments in unconsolidated entities42,796 10,407Other assets57,890 45,725Total deferred tax assets565,673 527,460Valuation allowance(5,773) (5,945)Total deferred tax assets after valuation allowance559,900 521,515Deferred tax liabilities: Capitalized expenses30,632 32,954Deferred income226,195 104,270Convertible debt basis difference— 229Rialto investments in partnerships— 11,055Other25,675 32,282Total deferred tax liabilities282,502 180,790Net deferred tax assets$277,398 340,725102Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)The detail of the Company's net deferred tax assets were as follows: November 30,(In thousands)2016 2015Net deferred tax assets (liabilities): (1) Lennar Homebuilding$249,714 327,645Rialto26,547 10,518Lennar Financial Services5,919 2,562Lennar Multifamily(4,782) —Net deferred tax assets$277,398 340,725(1)Net deferred tax assets and net deferred tax liabilities detailed above are included within other assets and other liabilities in the respective segments.A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on the available evidence, it is more likelythan not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed each reporting periodby the Company based on the consideration of all available positive and negative evidence using a "more-likely-than-not" standard with respect to whetherdeferred tax assets will be realized. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses,actual earnings, forecasts of future profitability, the duration of statutory carryforward periods, the Company’s experience with loss carryforwards notexpiring unused and tax planning alternatives.As of November 30, 2016 and 2015, the net deferred tax assets included a valuation allowance of $5.8 million and $5.9 million, respectively,primarily related to state net operating loss ("NOL") carryforwards that are not more likely than not to be utilized due to an inability to carry back these lossesin most states and short carryforward periods that exist in certain states. During the years ended November 30, 2016 and 2015, the Company reversed $0.2million and $2.1 million, respectively, of valuation allowance primarily due to the utilization of state net operating losses.At November 30, 2016 and 2015, the Company had federal tax effected NOL carryforwards totaling $1.8 million and $1.9 million, respectively, thatmay be carried forward up to 20 years to offset future taxable income and begin to expire in 2029. At November 30, 2016 and 2015, the Company had statetax effected NOL carryforwards totaling $90.6 million and $120.7 million, respectively, that may be carried forward from 5 to 20 years, depending on the taxjurisdiction, with losses expiring between 2017 and 2035.The following table summarizes the changes in gross unrecognized tax benefits: Years Ended November 30,(In thousands)2016 2015 2014Gross unrecognized tax benefits, beginning of year$12,285 7,257 10,459Increase due to tax positions taken during prior period (1)— 5,028 —Decreases due to settlements with taxing authorities (2)— — (3,202)Gross unrecognized tax benefits, end of year$12,285 12,285 7,257(1)Increased the Company's effective tax rate for the year ended November 30, 2015 from 32.30% to 32.72% due to state audits.(2)Decreased the Company's effective tax rate for the year November 30, 2014 from 35.13% to 34.80%.If the Company were to recognize its gross unrecognized tax benefits as of November 30, 2016, $8.0 million would affect the Company’s effectivetax rate. The Company does not expect the total amount of unrecognized tax benefits to increase or decrease by a material amount within the followingtwelve months.103Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)The following summarizes the changes in interest and penalties accrued with respect to gross unrecognized tax benefits: November 30,(In thousands)2016 2015Accrued interest and penalties, beginning of the year$65,145 31,469Accrual of interest and penalties (primarily related to federal and state audits)3,251 33,841Reduction of interest and penalties (1)(22,423) (165)Accrued interest and penalties, end of the year$45,973 65,145(1)The Company's accrual for interest and penalties was reduced during the year ended November 30, 2016 primarily due to a settlement with the IRS.The IRS is currently examining the Company’s federal income tax returns for fiscal year 2015, and certain state taxing authorities are examiningvarious fiscal years. The final outcome of these examinations is not yet determinable. The statute of limitations for the Company’s major tax jurisdictionsremains open for examination for fiscal year 2005 and subsequent years. The Company participates in an IRS examination program, Compliance AssuranceProcess, "CAP." This program operates as a contemporaneous exam throughout the year in order to keep exam cycles current and achieve a higher level ofcompliance.11. Earnings Per ShareBasic and diluted earnings per share were calculated as follows: Years Ended November 30,(In thousands, except per share amounts)2016 2015 2014Numerator: Net earnings attributable to Lennar$911,844 802,894 638,916Less: distributed earnings allocated to nonvested shares337 361 414Less: undistributed earnings allocated to nonvested shares8,852 8,371 7,379Numerator for basic earnings per share902,655 794,162 631,123Less: net amount attributable to noncontrolling interests in Rialto's Carried Interest Incentive Plan (1)1,028 4,120 —Plus: interest on 3.25% convertible senior notes due 20215,528 7,928 7,928Plus: undistributed earnings allocated to convertible shares8,852 8,371 7,379Less: undistributed earnings reallocated to convertible shares8,438 7,528 6,632Numerator for diluted earnings per share$907,569 798,813 639,798Denominator: Denominator for basic earnings per share - weighted average common shares outstanding218,421 205,189 202,209Effect of dilutive securities: Share-based payments3 9 8Convertible senior notes12,288 25,614 26,023Denominator for diluted earnings per share - weighted average common shares outstanding230,712 230,812 228,240Basic earnings per share$4.13 3.87 3.12Diluted earnings per share$3.93 3.46 2.80(1)The amounts presented above relate to Rialto's Carried Interest Incentive Plan adopted in June 2015 (see Note 8) and represent the difference between the advanced taxdistributions received by Rialto's subsidiary and the amount Lennar, as the parent company, is assumed to own.For the years ended November 30, 2016, 2015 and 2014, there were no options to purchase shares of common stock that were outstanding and anti-dilutive.104Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)12. Capital StockPreferred StockThe Company is authorized to issue 500,000 shares of preferred stock with a par value of $10 per share and 100 million shares of participatingpreferred stock with a par value of $0.10 per share. No shares of preferred stock or participating preferred stock have been issued as of November 30, 2016 and2015.Common StockDuring each of the years ended November 30, 2016, 2015 and 2014, the Company’s Class A and Class B common stockholders received a per shareannual dividend of $0.16. The only significant difference between the Class A common stock and Class B common stock is that Class A common stockentitles holders to one vote per share and the Class B common stock entitles holders to ten votes per share.As of November 30, 2016, Stuart Miller, the Company’s Chief Executive Officer and a Director, directly owned, or controlled through family-ownedentities, shares of Class A and Class B common stock, which represented approximately 42% voting power of the Company’s stock.The Company has a stock repurchase program adopted in 2001, which originally authorized the purchase of up to 20 million shares of itsoutstanding common stock. During the years ended November 30, 2016, 2015 and 2014, there were no share repurchases of common stock under the stockrepurchase program. As of November 30, 2016, the remaining authorized shares that could be purchased under the stock repurchase program were 6.2 millionshares of common stock.During the years ended November 30, 2016 and 2015, treasury stock increased by 0.1 million shares and 0.3 million shares, respectively, of Class Acommon stock primarily due to activity related to the Company's equity compensation plan.Restrictions on Payment of DividendsThere are no restrictions on the payment of dividends on common stock by the Company. There are no agreements which restrict the payment ofdividends by subsidiaries of the Company other than (i) the need to maintain the financial ratios and net worth requirements under the Lennar FinancialServices segment’s warehouse lines of credit, which restrict the payment of dividends from the Company’s mortgage subsidiaries following the occurrenceand during the continuance of an event of default thereunder and limit dividends to 50% of net income in the absence of an event of default, and (ii) therestriction under Rialto's 7.00% Senior Notes indenture that limits Rialto's ability to make distributions to Lennar.401(k) PlanUnder the Company’s 401(k) Plan (the "Plan"), contributions made by associates can be invested in a variety of mutual funds or proprietary fundsprovided by the Plan trustee. The Company may also make contributions for the benefit of associates. The Company records as compensation expense itscontribution to the Plan. For the years ended November 30, 2016, 2015 and 2014, this amount was $15.7 million, $13.5 million and $10.2 million,respectively.105Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)13. Share-Based PaymentsCompensation expense related to the Company’s share-based awards was as follows: Years ended November 30,(In thousands)2016 2015 2014Nonvested shares$55,516 43,742 40,581Stock options (1)— 131 137Total compensation expense for share-based awards$55,516 43,873 40,718(1)Stock options expense relates to stock option awards granted to Lennar's non-employee directors for the years ended November 30, 2015 and 2014. The fair value of thesestock option awards was estimated on the date of grant using a Black-Scholes option-pricing model.Cash flows resulting from tax benefits related to tax deductions in excess of the compensation expense recognized are classified as financing cashflows. For the years ended November 30, 2016, 2015 and 2014 there was $7.0 million, $0.1 million, and $7.5 million, respectively, of excess tax benefitsfrom share-based awards primarily related to nonvested shares.The fair value of nonvested shares is determined based on the trading price of the Company’s common stock on the grant date. The weightedaverage fair value of nonvested shares granted during the years ended November 30, 2016, 2015 and 2014 was $45.10, $49.01 and $41.89, respectively. Asummary of the Company’s nonvested shares activity for the year ended November 30, 2016 was as follows: Shares Weighted AverageGrant Date Fair ValueNonvested shares at November 30, 20152,251,553 $44.30Grants1,228,096 $45.10Vested(1,120,909) $41.89Forfeited(75,761) $45.66Nonvested shares at November 30, 20162,282,979 $45.86At November 30, 2016, there was $75.2 million of unrecognized compensation expense related to unvested share-based awards granted under theCompany’s share-based payment plan, all of which relates to nonvested shares with a weighted average remaining contractual life of 1.9 years. For the yearended November 30, 2016, 1.1 million nonvested shares were vested. For the years ended November 30, 2015 and 2014, 1.2 million nonvested shares werevested each year.106Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)14. Financial Instruments and Fair Value DisclosuresThe following table presents the carrying amounts and estimated fair values of financial instruments held by the Company at November 30, 2016and 2015, using available market information and what the Company believes to be appropriate valuation methodologies. Considerable judgment is requiredin interpreting market data to develop the estimates of fair value. The use of different market assumptions and/or estimation methodologies might have amaterial effect on the estimated fair value amounts. The table excludes cash and cash equivalents, restricted cash, receivables, net, and accounts payable, allof which had fair values approximating their carrying amounts due to the short maturities and liquidity of these instruments. November 30, 2016 2015 Fair Value Carrying Fair Carrying Fair(In thousands)Hierarchy Amount Value Amount ValueASSETS Rialto: Loans receivable, netLevel 3 $111,608 113,747 164,826 169,302Investments held-to-maturityLevel 3 $71,260 69,992 25,625 25,227Lennar Financial Services: Loans held-for-investment, netLevel 3 $30,004 31,233 30,998 29,931Investments held-to-maturityLevel 2 $41,991 42,058 40,174 40,098LIABILITIES Lennar Homebuilding senior notes and other debts payableLevel 2 $4,575,977 4,669,643 5,025,130 5,936,327Rialto notes and other debts payableLevel 2 $622,335 646,366 771,728 803,013Lennar Financial Services notes and other debts payableLevel 2 $1,077,228 1,077,228 858,300 858,300The following methods and assumptions are used by the Company in estimating fair values:Rialto—The fair values for loans receivable, net are based on the fair value of the collateral less estimated cost to sell or discounted cash flows, ifestimable. The fair value for investments held-to-maturity is based on discounted cash flows. For notes and other debts payable, the fair value is calculatedbased on discounted cash flows using the Company’s weighted average borrowing rate and for the warehouse repurchase financing agreements fair valuesapproximate their carrying value due to their short-term maturities.Lennar Financial Services—The fair values above are based on quoted market prices, if available. The fair values for instruments that do not havequoted market prices are estimated by the Company on the basis of discounted cash flows or other financial information. For notes and other debts payable,the fair values approximate their carrying value due to variable interest pricing terms and the short-term nature of the borrowings.Lennar Homebuilding—For senior notes and other debts payable, the fair value of fixed-rate borrowings is primarily based on quoted market pricesand the fair value of variable-rate borrowings is based on expected future cash flows calculated using current market forward rates.Fair Value MeasurementsGAAP provides a framework for measuring fair value, expands disclosures about fair value measurements and establishes a fair value hierarchywhich prioritizes the inputs used in measuring fair value summarized as follows:Level 1: Fair value determined based on quoted prices in active markets for identical assets.Level 2: Fair value determined using significant other observable inputs.Level 3: Fair value determined using significant unobservable inputs.107Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)The Company’s financial instruments measured at fair value on a recurring basis are summarized below:(In thousands)FairValueHierarchy Fair Value atNovember 30, 2016 Fair Value atNovember 30, 2015Rialto Financial Assets: Loans held-for-sale (1)Level 3 $126,947 316,275Credit default swaps (2)Level 2 $2,863 6,153Rialto Financial Liabilities: Interest rate swaps and swap futures (3)Level 1 $6 978Lennar Financial Services Assets: Loans held-for-sale (4)Level 2 $939,405 843,252Investments available-for-saleLevel 1 $53,570 42,827Mortgage loan commitmentsLevel 2 $7,437 13,060Forward contractsLevel 2 $26,467 531Mortgage servicing rightsLevel 3 $23,930 16,770(1)The aggregate fair value of Rialto loans held-for-sale of $126.9 million at November 30, 2016 is below their aggregate principal balance of $127.8 million by $0.9 million. Theaggregate fair value of Rialto loans held-for-sale of $316.3 million at November 30, 2015 exceeds their aggregate principal balance of $314.3 million by $2.0 million.(2)Rialto's credit default swaps are included within Rialto's other assets.(3)Rialto's interest rate swaps and swap futures are included within Rialto's other liabilities.(4)The aggregate fair value of Lennar Financial Services loans held-for-sale of $939.4 million at November 30, 2016 exceeds their aggregate principal balance of $931.0 millionby $8.4 million. The aggregate fair value of Lennar Financial Services loans held-for-sale of $843.3 million at November 30, 2015 exceeds their aggregate principal balance of$815.0 million by $28.2 million.The estimated fair values of the Company’s financial instruments have been determined by using available market information and what theCompany believes to be appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fairvalue. The use of different market assumptions and/or estimation methodologies might have a material effect on the estimated fair value amounts. Thefollowing methods and assumptions are used by the Company in estimating fair values:Rialto loans held-for-sale— The fair value of loans held-for-sale is calculated from model-based techniques that use discounted cash flowassumptions and the Company’s own estimates of CMBS spreads, market interest rate movements and the underlying loan credit quality. Loan values arecalculated by allocating the change in value of an assumed CMBS capital structure to each loan. The value of an assumed CMBS capital structure iscalculated, generally, by discounting the cash flows associated with each CMBS class at market interest rates and at the Company’s own estimate of CMBSspreads. The Company estimates CMBS spreads by observing the pricing of recent CMBS offerings, secondary CMBS markets, changes in the CMBX index,and general capital and commercial real estate market conditions. Considerations in estimating CMBS spreads include comparing the Company’s currentloan portfolio with comparable CMBS offerings containing loans with similar duration, credit quality and collateral composition. These methods useunobservable inputs in estimating a discount rate that is used to assign a value to each loan. While the cash payments on the loans are contractual, thediscount rate used and assumptions regarding the relative size of each class in the CMBS capital structure can significantly impact the valuation. Therefore,the estimates used could differ materially from the fair value determined when the loans are sold to a securitization trust.Rialto interest rate swaps and swap futures— The fair value of interest rate swaps (derivatives) is based on observable values for underlyinginterest rates and market determined risk premiums. The fair value of interest rate swap futures (derivatives) is based on quoted market prices for identicalinvestments traded in active markets.Rialto credit default swaps— The fair value of credit default swaps (derivatives) is based on quoted market prices for similar investments traded inactive markets.Lennar Financial Services loans held-for-sale— Fair value is based on independent quoted market prices, where available, or the prices for othermortgage whole loans with similar characteristics. Management believes carrying loans held-for-sale at fair value improves financial reporting by mitigatingvolatility in reported earnings caused by measuring the fair value of the loans and the derivative instruments used to economically hedge them withouthaving to apply complex hedge accounting provisions. In addition, the Company recognizes the fair value of its rights to service a mortgage loan as revenueupon entering into an interest rate lock loan commitment with a borrower. The fair value of these servicing rights is included in Lennar Financial Services’loans held-for-sale as of November 30, 2016 and 2015. Fair value of servicing rights is determined based on actual sales of servicing rights on loans withsimilar characteristics.108Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Lennar Financial Services investments available-for-sale— The fair value of these investments is based on the quoted market prices for similarfinancial instruments.Lennar Financial Services mortgage loan commitments— Fair value of commitments to originate loans is based upon the difference between thecurrent value of similar loans and the price at which the Lennar Financial Services segment has committed to originate the loans. The fair value ofcommitments to sell loan contracts is the estimated amount that the Lennar Financial Services segment would receive or pay to terminate the commitments atthe reporting date based on market prices for similar financial instruments. In addition, the Company recognizes the fair value of its rights to service amortgage loan as revenue upon entering into an interest rate lock loan commitment with a borrower. The fair value of servicing rights is determined based onactual sales of servicing rights on loans with similar characteristics. The fair value of the mortgage loan commitments and related servicing rights is includedin Lennar Financial Services’ other assets.Lennar Financial Services forward contracts— Fair value is based on quoted market prices for similar financial instruments. The fair value offorward contracts is included in the Lennar Financial Services segment's other assets as of November 30, 2016 and November 30, 2015.The Lennar Financial Services segment uses mandatory mortgage-backed securities ("MBS") forward commitments, option contracts and investorcommitments to hedge its mortgage-related interest rate exposure. These instruments involve, to varying degrees, elements of credit and interest rate risk.Credit risk associated with MBS forward commitments, option contracts and loan sales transactions is managed by limiting the Company’s counterparties toinvestment banks, federally regulated bank affiliates and other investors meeting the Company’s credit standards. The segment’s risk, in the event of defaultby the purchaser, is the difference between the contract price and fair value of the MBS forward commitments and option contracts. At November 30, 2016,the segment had open commitments amounting to $1.2 billion to sell MBS with varying settlement dates through February 2017.Lennar Financial Services mortgage servicing rights — Lennar Financial Services records the value of mortgage servicing rights when it sellsloans on a servicing-retained basis or through the acquisition or assumption of the right to service a financial asset. The fair value of the mortgage servicingrights is calculated using third-party valuations. The key assumptions, which are generally unobservable inputs, used in the valuation of the mortgageservicing rights include mortgage prepayment rates, discount rates and delinquency rates. As of November 30, 2016, the key assumptions used indetermining the fair value include a 12.9% mortgage prepayment rate, a 12.4% discount rate and a 7.0% delinquency rate. The fair value of mortgageservicing rights is included in the Lennar Financial Services segment's other assets.The changes in fair values for Level 1 and Level 2 financial instruments measured on a recurring basis are shown below by financial instrument andfinancial statement line item: Years Ended November 30,(In thousands)2016 2015 2014Changes in fair value included in Lennar Financial Services revenues: Loans held-for-sale$(19,865) (4,137) 17,124Mortgage loan commitments$(5,623) 373 5,352Forward contracts$25,936 8,107 (9,020)Investments available-for-sale$53 26 —Changes in fair value included in Rialto revenues: Financial Assets: Credit default swaps$(2,063) 477 (288)Financial Liabilities: Interest rate swaps and swap futures$972 398 (1,346)Changes in fair value included in other comprehensive income, net of tax: Lennar Financial Services investments available-for-sale$(295) (65) 130Interest on Lennar Financial Services loans held-for-sale and Rialto loans held-for-sale measured at fair value is calculated based on the interest rateof the loan and recorded as revenues in the Lennar Financial Services’ statement of operations and Rialto's statement of operations, respectively.109Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)The following table represents the reconciliation of the beginning and ending balance for the Level 3 recurring fair value measurements: Years Ended November 30, 2016 2015 Lennar FinancialServices Rialto Lennar FinancialServices Rialto(In thousands)Mortgage servicingrights Loans held-for-sale Mortgage servicingrights Loans held-for-saleBeginning of year$16,770 316,275 17,353 113,596Purchases/loan originations9,195 1,696,188 3,290 2,628,019Sales/loan originations sold, including those not settled— (1,881,682) — (2,424,478)Disposals/settlements(4,063) — (3,577) —Changes in fair value (1)2,028 (1,759) (296) (899)Interest and principal paydowns— (2,075) — 37End of year$23,930 126,947 16,770 316,275(1)Changes in fair value for Rialto loans held-for-sale and Lennar Financial Services mortgage servicing rights are included in Rialto's and Lennar Financial Services' revenues,respectively.The Company’s assets measured at fair value on a nonrecurring basis are those assets for which the Company has recorded valuation adjustments andwrite-offs. The fair values included in the tables below represent only those assets whose carrying values were adjusted to fair value during the respectiveperiods disclosed. The assets measured at fair value on a nonrecurring basis are summarized below: Years Ended November 30, 2016 2015 2014(In thousands)FairValueHierarchy CarryingValue Fair Value Total Gains(Losses) (1) CarryingValue Fair Value TotalGains(Losses) (1) CarryingValue Fair Value TotalLosses (1)Financial assets Rialto: Impaired loans receivableLevel 3 $79,581 61,352 (18,229) 127,319 116,956 (10,363) 187,218 130,105 (57,113)Non-financial assets Lennar Homebuilding: Finished homes and construction inprogress (2)Level 3 $— — — 59,913 47,898 (12,015) 8,071 4,498 (3,573)Land and land under development (2)Level 3 $29,418 22,925 (6,493) 32,500 20,033 (12,467) 7,013 6,143 (870)Rialto: REO - held-for-sale (3) Upon acquisition/transferLevel 3 $43,267 40,671 (2,596) 40,833 38,383 (2,450) 26,750 25,145 (1,605)Upon management periodic valuationsLevel 3 $87,009 64,452 (22,557) 36,730 26,988 (9,742) 50,115 42,279 (7,836)REO - held-and-used, net (4) Upon acquisition/transferLevel 3 $9,887 13,772 3,885 18,996 20,134 1,138 60,572 55,407 (5,165)Upon management periodic valuationsLevel 3 $18,821 17,002 (1,819) 8,066 5,442 (2,624) 39,728 28,227 (11,501)(1)Represents losses due to valuation adjustments, write-offs, gains (losses) from transfers or acquisitions of real estate through foreclosure and REO impairments recordedduring the years ended November 30, 2016, 2015 and 2014.(2)Valuation adjustments were included in Lennar Homebuilding costs and expenses in the Company's consolidated statement of operations for the years ended November 30,2016, 2015 and 2014.(3)REO held-for-sale assets are initially recorded at fair value less estimated costs to sell at the time of the transfer or acquisition through, or in lieu of, loan foreclosure. The fairvalue of REO held-for-sale is based upon appraised value at the time of foreclosure or management's best estimate. In addition, management periodically performs valuationsof its REO held-for-sale. The gains (losses) upon the transfer or acquisition of REO and impairments were included in Rialto other income (expense), net, in the Company’sconsolidated statement of operations for the years ended November 30, 2016, 2015 and 2014.110Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)(4)REO held-and-used, net, assets are initially recorded at fair value at the time of acquisition through, or in lieu of, loan foreclosure. The fair value of REO held-and-used, net, isbased upon the appraised value at the time of foreclosure or management’s best estimate. In addition, management periodically performs valuations of its REO held-and-used,net. The gains (losses) upon acquisition of REO held-and-used, net and impairments were included in Rialto other income (expense), net, in the Company’s consolidatedstatement of operations for the years ended November 30, 2016, 2015 and 2014.See Note 1 for a detailed description of the Company’s process for identifying and recording valuation adjustments related to Lennar Homebuildinginventory and Rialto REO assets and loans receivables.15. Consolidation of Variable Interest EntitiesThe Company evaluated the joint venture agreements of its joint ventures that were formed or that had reconsideration events during the year endedNovember 30, 2016. Based on the Company’s evaluation, during the year ended November 30, 2016, the Company consolidated entities that had totalcombined assets of $122.1 million and liabilities of $96.4 million. During the year ended November 30, 2016, there were no VIEs that were deconsolidated.The Company’s recorded investments in unconsolidated entities were as follows: November 30,(In thousands)2016 2015Lennar Homebuilding$811,723 741,551Rialto$245,741 224,869Lennar Multifamily$318,559 250,876Consolidated VIEsAs of November 30, 2016, the carrying amount of the VIEs’ assets and non-recourse liabilities that consolidated was $536.3 million and $126.4million, respectively. As of November 30, 2015, the carrying amount of the VIEs’ assets and non-recourse liabilities that consolidated was $652.3 million and$84.4 million, respectively. Those assets are owned by, and those liabilities are obligations of, the VIEs, not the Company.A VIE’s assets can only be used to settle obligations of that VIE. The VIEs are not guarantors of the Company’s senior notes and other debts payable.The assets held by a VIE usually are collateral for that VIE’s debt. The Company and other partners do not generally have an obligation to make capitalcontributions to a VIE unless the Company and/or the other partner(s) have entered into debt guarantees with the VIE’s banks. Other than debt guaranteeagreements with a VIE’s banks, there are no liquidity arrangements or agreements to fund capital or purchase assets that could require the Company toprovide financial support to a VIE. While the Company has option contracts to purchase land from certain of its VIEs, the Company is not required topurchase the assets and could walk away from the contracts.Unconsolidated VIEsAt November 30, 2016 and 2015, the Company’s recorded investments in VIEs that are unconsolidated and its estimated maximum exposure to losswere as follows:November 30, 2016 (In thousands)Investments inUnconsolidatedVIEs Lennar’sMaximumExposure to LossLennar Homebuilding (1)$120,940 164,804Rialto (2)71,260 71,260Lennar Multifamily (3)240,928 549,093 $433,128 785,157111Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)November 30, 2015 (In thousands)Investments inUnconsolidatedVIEs Lennar’sMaximumExposure to LossLennar Homebuilding (1)$102,706 111,215Rialto (2)25,625 25,625Lennar Multifamily (3)177,359 586,842 $305,690 723,682(1)At November 30, 2016, the maximum exposure to loss of Lennar Homebuilding’s investments in unconsolidated VIEs was limited to its investments in the unconsolidatedVIEs, except with regard to a $43.4 million repayment guarantee of an unconsolidated entity's debt. At November 30, 2015, the maximum exposure to loss of LennarHomebuilding’s investments in unconsolidated VIEs was limited to its investments in the unconsolidated VIEs, except with regard to an $8.3 million remaining commitment tofund an unconsolidated entity for further expenses up until the unconsolidated entity obtained permanent financing.(2)At both November 30, 2016 and 2015, the maximum recourse exposure to loss of Rialto’s investments in unconsolidated VIEs was limited to its investments in theunconsolidated entities VIEs. At November 30, 2016 and 2015, investments in unconsolidated VIEs and Lennar’s maximum exposure to loss included $71.3 million and$25.6 million, respectively, related to Rialto’s investments held-to-maturity.(3)As of November 30, 2016 and 2015, the remaining equity commitment of $288.2 million and $378.3 million, respectively, to fund the Venture for future expenditures relatedto the construction and development of its projects was included in Lennar's maximum exposure to loss. In addition, at November 30, 2016 and 2015, the maximum exposureto loss of Lennar Multifamily's investments in unconsolidated VIEs was limited to its investments in the unconsolidated VIEs, except with regard to $19.7 million and $30.0million, respectively, of letters of credit outstanding for certain of the unconsolidated VIEs that could be drawn upon in the event of default under their debt agreements.While these entities are VIEs, the Company has determined that the power to direct the activities of the VIEs that most significantly impact the VIEs’economic performance is generally shared and the Company and its partners are not de-facto agents. While the Company generally manages the day-to-dayoperations of the VIEs, each of these VIEs has an executive committee made up of representatives from each partner. The members of the executive committeehave equal votes and major decisions require unanimous consent and approval from all members. The Company does not have the unilateral ability toexercise participating voting rights without partner consent.As of November 30, 2016, the Company and other partners do not generally have an obligation to make capital contributions to the VIEs, except for$288.2 million remaining equity commitment to fund the Venture for future expenditures related to the construction and development of the projects and$19.7 million of letters of credit outstanding for certain Lennar Multifamily unconsolidated VIEs that could be drawn upon in the event of default under theirdebt agreements. In addition, there are no liquidity arrangements or agreements to fund capital or purchase assets that could require the Company to providefinancial support to the VIEs, except with regard to a $43.4 million repayment guarantee of an unconsolidated entity's debt. Except for the unconsolidatedVIEs discussed above, the Company and the other partners did not guarantee any debt of the other unconsolidated VIEs. While the Company has optioncontracts to purchase land from certain of its unconsolidated VIEs, the Company is not required to purchase the assets and could walk away from thecontracts.Option ContractsThe Company has access to land through option contracts, which generally enables it to control portions of properties owned by third parties(including land funds) and unconsolidated entities until the Company has determined whether to exercise the option.The Company evaluates all option contracts for land to determine whether they are VIEs and, if so, whether the Company is the primary beneficiaryof certain of these option contracts. Although the Company does not have legal title to the optioned land, if the Company is deemed to be the primarybeneficiary or makes a significant deposit for optioned land, it may need to consolidate the land under option at the purchase price of the optioned land.During the year ended November 30, 2016, consolidated inventory not owned increased by $62.2 million with a corresponding increase toliabilities related to consolidated inventory not owned in the accompanying consolidated balance sheet as of November 30, 2016. The increase was primarilyrelated to the consolidation of an option agreement, partially offset by the Company exercising its option to acquire land under previously consolidatedcontracts. To reflect the purchase price of the inventory consolidated, the Company had a net reclass related to option deposits from land under developmentto consolidated inventory not owned in the accompanying consolidated balance sheet as of November 30, 2016. The liabilities related to consolidatedinventory not owned primarily represent the difference between the option exercise prices for the optioned land and the Company’s cash deposits.112Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)The Company’s exposure to loss related to its option contracts with third parties and unconsolidated entities consisted of its non-refundable optiondeposits and pre-acquisition costs totaling $85.0 million and $89.2 million at November 30, 2016 and 2015, respectively. Additionally, the Company hadposted $45.1 million and $70.4 million of letters of credit in lieu of cash deposits under certain land and option contracts as of November 30, 2016 and 2015,respectively.16. Commitments and Contingent LiabilitiesThe Company is party to various claims, legal actions and complaints arising in the ordinary course of business. In the opinion of management, thedisposition of these matters will not have a material adverse effect on the Company’s consolidated financial statements. The Company is also a party tovarious lawsuits involving purchases and sales of real property. These lawsuits include claims regarding representations and warranties made in connectionwith the transfer of properties and disputes regarding the obligation to purchase or sell properties.The Company has been engaged in litigation since 2008 in the United States District Court for the District of Maryland regarding whether theCompany is required by a contract it entered into in 2005 to purchase a property in Maryland. After entering into the contract, the Company laterrenegotiated the purchase price, reducing it from $200 million to $134 million, $20 million of which has been paid and subsequently written off, leaving abalance of $114 million. In January 2015, the District Court rendered a decision ordering the Company to purchase the property for the $114 million balanceof the contract price, to pay interest at the rate of 12% per annum from May 27, 2008, and to reimburse the seller for real estate taxes and attorneys’ fees. TheCompany believes the decision is contrary to applicable law and has appealed the decision. The Company does not believe it is probable that a loss hasoccurred and, therefore, no liability has been recorded with respect to this case.If the District Court decision is affirmed in its entirety, the Company will purchase the property and record it at fair value, which the Companybelieves will not result in an impairment. The amount of interest the Company will be required to pay has been the subject of further proceedings before thecourt. On June 29, 2015, the court ruled that interest will be calculated as simple interest at the rate of 12% per annum from May 27, 2008 until the date theCompany purchases the property. Simple interest on $114 million at 12% per annum will accrue at the rate of $13.7 million per year, totaling approximately$116 million as of November 30, 2016. In addition, if the Company is required to purchase the property, it will be obligated to reimburse the seller for realestate taxes, which currently total $1.6 million. The Company has not engaged in discovery regarding the amount of the plaintiffs’ attorneys’ fees. If theDistrict Court decision is totally reversed on appeal, the Company will not have to purchase the property or pay interest, real estate taxes or attorneys’ fees.In its June 29, 2015 ruling, the District Court determined that the Company would be permitted to stay the judgment during appeal by posting abond in the amount of $223.4 million related to pending litigation. The District Court calculated this amount by adding 12% per annum simple interest tothe $114 million purchase price for the period beginning May 27, 2008 through May 26, 2016, the date the District Court estimated the appeal of the casewould be concluded.The Company does not believe that the ultimate resolution of these claims or lawsuits will have a material adverse effect on its business or financialposition. However, the financial effect of litigation concerning purchases and sales of property may depend upon the value of the subject property, whichmay have changed from the time the agreement for purchase or sale was entered into.The Company is subject to the usual obligations associated with entering into contracts (including option contracts) for the purchase, developmentand sale of real estate, which it does in the routine conduct of its business. Option contracts generally enable the Company to control portions of propertiesowned by third parties (including land funds) and unconsolidated entities until the Company determines whether to exercise the option. The use of optioncontracts allows the Company to reduce the financial risks associated with long-term land holdings. At November 30, 2016, the Company had $85.0 millionof non-refundable option deposits and pre-acquisition costs related to certain of these homesites, which were included in inventories in the consolidatedbalance sheet.113Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)The Company has entered into agreements to lease certain office facilities and equipment under operating leases. Future minimum payments underthe noncancellable leases in effect at November 30, 2016 were as follows:(In thousands)LeasePayments2017$35,443201833,877201924,816202018,767202114,999Thereafter16,120Rental expense for the years ended November 30, 2016, 2015 and 2014 was $63.2 million, $55.9 million and $48.9 million, respectively.The Company is committed, under various letters of credit, to perform certain development and construction activities and provide certainguarantees in the normal course of business. Outstanding letters of credit under these arrangements totaled $481.1 million at November 30, 2016.Additionally, at November 30, 2016, the Company had outstanding surety bonds of $1.4 billion including performance surety bonds related to siteimprovements at various projects (including certain projects in the Company’s joint ventures) and financial surety bonds including $223.4 million related topending litigation. Although significant development and construction activities have been completed related to these site improvements, these bonds aregenerally not released until all development and construction activities are completed. As of November 30, 2016, there were approximately $488.9 million,or 42%, of anticipated future costs to complete related to these site improvements. The Company does not presently anticipate any draws upon these bondsthat would have a material effect on its consolidated financial statements.Substantially all of the loans the Lennar Financial Services segment originates are sold within a short period in the secondary mortgage market on aservicing released, non-recourse basis. After the loans are sold, the Company retains potential liability for possible claims by purchasers that it breachedcertain limited industry-standard representations and warranties in the loan sale agreements. Over the last several years there has been an industry-wide effortby purchasers to defray their losses by purporting to have found inaccuracies related to sellers’ representations and warranties in particular loan saleagreements. Mortgage investors could seek to have the Company buy back mortgage loans or compensate them for losses incurred on mortgage loans that theCompany has sold based on claims that the Company breached its limited representations or warranties. The Company’s mortgage operations haveestablished reserves for possible losses associated with mortgage loans previously originated and sold to investors. While the Company believes that it hasadequately reserved for known losses and projected repurchase requests, given the volatility in the mortgage industry and the uncertainty regarding theultimate resolution of these claims, if either actual repurchases or the losses incurred resolving those repurchases exceed the Company’s expectations,additional recourse expense may be incurred.17. Business AcquisitionOn September 22, 2016, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with WCI, under which theCompany will acquire WCI through a merger for a combination of the Company’s Class A common stock and cash totaling $23.50 per share of WCI commonstock. It is currently anticipated that the merger consideration payable to WCI stockholders will be $11.75 in cash and $11.75 in Class A common stock, withthe Class A common stock valued at the average of its volume weighted average price on the New York Stock Exchange ("NYSE") on each of the ten NYSEtrading days before closing. However, the Company has the right to reduce the portion of the merger consideration that will be Class A common stock andincrease the portion that will be cash, including the right to make the entire merger consideration cash. WCI can terminate the Merger Agreement to engagein a transaction that its Board of Directors deems to be more favorable to its stockholders than the transaction with the Company, unless the Company willmatch the deemed more favorable transaction. However, if WCI terminates the Merger Agreement to engage in another transaction, it will have to pay theCompany a termination fee of $22.5 million. The Merger Agreement contains customary representations and warranties by the parties, and is subject toclosing conditions, including the need for approval by the holders of WCI’s common stock. It is anticipated that a meeting of WCI stockholders to vote onthe transaction will be held in February 2017, and, if the transaction is approved by the WCI stockholders, it will close promptly after the stockholder vote.114Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)18. Supplemental Financial InformationThe indentures governing the Company’s 12.25% senior notes due 2017, 4.75% senior notes due 2017, 6.95% senior notes due 2018, 4.125% seniornotes due 2018, 4.500% senior notes due 2019, 4.50% senior notes due 2019, 4.750% senior notes due 2021, 4.750% senior notes due 2022, 4.875% seniornotes due 2023 and 4.750% senior notes due 2025 require that, if any of the Company’s 100% owned subsidiaries, other than its finance companysubsidiaries and foreign subsidiaries, directly or indirectly guarantee at least $75 million principal amount of debt of Lennar Corporation, those subsidiariesmust also guarantee Lennar Corporation’s obligations with regard to its senior notes. The entities referred to as "guarantors" in the following tables aresubsidiaries that are not finance company subsidiaries or foreign subsidiaries and were guaranteeing the senior notes because at November 30, 2016 theywere guaranteeing Lennar Corporation's letter of credit facilities and its Credit Facility, described in Note 6. The guarantees are full, unconditional and jointand several and the guarantor subsidiaries are 100% directly or indirectly owned by Lennar Corporation. A subsidiary's guarantee will be suspended at anytime when it is not directly or indirectly guaranteeing at least $75 million principal amount of debt of Lennar Corporation, and a subsidiary will be releasedfrom its guarantee and any other obligations it may have regarding the senior notes if all or substantially all its assets, or all of its capital stock, are sold orotherwise disposed of.For purposes of the consolidating statement of cash flows included in the following supplemental financial information, the Company's accountingpolicy is to treat cash received by Lennar Corporation ("the Parent") from its subsidiaries, to the extent of net earnings from such subsidiaries as a dividendand accordingly a return on investment within cash flows from operating activities. Distributions of capital received by the Parent from its subsidiaries arereflected as cash flows from investing activities. The cash outflows associated with the return on investment dividends and distributions of capital receivedby the Parent are reflected by the Guarantor and Non-Guarantor subsidiaries in the Dividends line item within cash flows from financing activities. All othercash flows between the Parent and its subsidiaries represent the settlement of receivables and payables between such entities in conjunction with the Parent'scentralized cash management arrangement with its subsidiaries, which operates with the characteristics of a revolving credit facility, and are accordinglyreflected net in the Intercompany line item within cash flows from investing activities for the Parent and net in the Intercompany line item within cash flowsfrom financing activities for the Guarantor and Non-Guarantor subsidiaries.115Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Supplemental information for the subsidiaries that were guarantor subsidiaries at November 30, 2016 was as follows:Consolidating Balance SheetNovember 30, 2016(In thousands)LennarCorporation GuarantorSubsidiaries Non-GuarantorSubsidiaries ConsolidatingAdjustments TotalASSETS Lennar Homebuilding: Cash and cash equivalents, restricted cash andreceivables, net$705,126 436,090 21,875 — 1,163,091Inventories— 8,901,874 277,052 — 9,178,926Investments in unconsolidated entities— 793,840 17,883 — 811,723Other assets227,267 346,865 84,224 (7,328) 651,028Investments in subsidiaries3,918,687 130,878 — (4,049,565) —Intercompany7,017,962 — — (7,017,962) — 11,869,042 10,609,547 401,034 (11,074,855) 11,804,768Rialto— — 1,276,210 — 1,276,210Lennar Financial Services loans held-for-sale— — 939,405 — 939,405Lennar Financial Services all other assets— 103,000 715,758 (3,491) 815,267Lennar Multifamily— — 526,131 — 526,131Total assets$11,869,042 10,712,547 3,858,538 (11,078,346) 15,361,781LIABILITIES AND EQUITY Lennar Homebuilding: Accounts payable and other liabilities$473,103 778,249 79,462 (10,819) 1,319,995Liabilities related to consolidated inventory not owned— 13,582 96,424 — 110,006Senior notes and other debts payable4,369,897 203,572 2,508 — 4,575,977Intercompany— 6,071,778 946,184 (7,017,962) — 4,843,000 7,067,181 1,124,578 (7,028,781) 6,005,978Rialto— — 707,980 — 707,980Lennar Financial Services— 38,530 1,279,753 — 1,318,283Lennar Multifamily— 117,973 — 117,973Total liabilities$4,843,000 7,105,711 3,230,284 (7,028,781) 8,150,214Stockholders’ equity7,026,042 3,606,836 442,729 (4,049,565) 7,026,042Noncontrolling interests— — 185,525 — 185,525Total equity7,026,042 3,606,836 628,254 (4,049,565) 7,211,567Total liabilities and equity$11,869,042 10,712,547 3,858,538 (11,078,346) 15,361,781116Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Consolidating Balance SheetNovember 30, 2015(In thousands)LennarCorporation GuarantorSubsidiaries Non-GuarantorSubsidiaries ConsolidatingAdjustments TotalASSETS Lennar Homebuilding: Cash and cash equivalents, restricted cash andreceivables, net$595,921 372,146 13,384 — 981,451Inventories— 8,571,769 168,827 — 8,740,596Investments in unconsolidated entities— 692,879 48,672 — 741,551Other assets193,360 324,050 75,108 16,704 609,222Investments in subsidiaries3,958,687 176,660 — (4,135,347) —Intercompany6,227,193 — — (6,227,193) — 10,975,161 10,137,504 305,991 (10,345,836) 11,072,820Rialto— — 1,505,500 — 1,505,500Lennar Financial Services loans held-for-sale— — 843,252 — 843,252Lennar Financial Services all other assets— 89,532 498,313 (5,260) 582,585Lennar Multifamily— — 426,796 (11,444) 415,352Total assets$10,975,161 10,227,036 3,579,852 (10,362,540) 14,419,509LIABILITIES AND EQUITY Lennar Homebuilding: Accounts payable and other liabilities$579,468 710,460 85,796 — 1,375,724Liabilities related to consolidated inventory not owned— 51,431 — — 51,431Senior notes and other debts payable4,746,749 267,531 10,850 — 5,025,130Intercompany— 5,514,610 712,583 (6,227,193) — 5,326,217 6,544,032 809,229 (6,227,193) 6,452,285Rialto— — 866,224 — 866,224Lennar Financial Services— 36,229 1,047,749 — 1,083,978Lennar Multifamily— — 66,950 — 66,950Total liabilities$5,326,217 6,580,261 2,790,152 (6,227,193) 8,469,437Stockholders’ equity5,648,944 3,646,775 488,572 (4,135,347) 5,648,944Noncontrolling interests— — 301,128 — 301,128Total equity5,648,944 3,646,775 789,700 (4,135,347) 5,950,072Total liabilities and equity$10,975,161 10,227,036 3,579,852 (10,362,540) 14,419,509117Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Consolidating Statement of Operations and Comprehensive IncomeYear Ended November 30, 2016(In thousands)LennarCorporation GuarantorSubsidiaries Non-GuarantorSubsidiaries ConsolidatingAdjustments TotalRevenues: Lennar Homebuilding$— 9,731,122 10,215 — 9,741,337Lennar Financial Services— 215,737 491,536 (20,018) 687,255Rialto— — 233,966 — 233,966Lennar Multifamily— — 287,527 (86) 287,441Total revenues— 9,946,859 1,023,244 (20,104) 10,949,999Cost and expenses: Lennar Homebuilding— 8,389,469 23,424 (13,012) 8,399,881Lennar Financial Services— 192,572 340,463 (9,397) 523,638Rialto— — 230,565 (796) 229,769Lennar Multifamily— — 301,786 — 301,786Corporate general and administrative226,482 1,019 — 5,061 232,562Total costs and expenses226,482 8,583,060 896,238 (18,144) 9,687,636Lennar Homebuilding equity in earnings (loss) fromunconsolidated entities— (49,662) 387 — (49,275)Lennar Homebuilding other income, net3,888 54,602 2,737 (3,850) 57,377Other interest expense(5,810) (4,626) — 5,810 (4,626)Rialto equity in earnings from unconsolidated entities— — 18,961 — 18,961Rialto other expense, net— — (39,850) — (39,850)Lennar Multifamily equity in earnings from unconsolidatedentities— — 85,519 — 85,519Earnings (loss) before income taxes(228,404) 1,364,113 194,760 — 1,330,469Benefit (provision) for income taxes71,719 (419,596) (69,501) — (417,378)Equity in earnings from subsidiaries1,068,529 63,278 — (1,131,807) —Net earnings (including net earnings attributable tononcontrolling interests)911,844 1,007,795 125,259 (1,131,807) 913,091Less: Net earnings attributable to noncontrolling interests— — 1,247 — 1,247Net earnings attributable to Lennar$911,844 1,007,795 124,012 (1,131,807) 911,844Other comprehensive income, net of tax: Net unrealized loss on securities available-for-sale$— — (295) — (295)Reclassification adjustments for gains included in net earnings,net of tax— — (53) — (53)Other comprehensive income attributable to Lennar$911,844 1,007,795 123,664 (1,131,807) 911,496Other comprehensive income attributable to noncontrollinginterests$— — 1,247 — 1,247118Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Consolidating Statement of Operations and Comprehensive IncomeYear Ended November 30, 2015(In thousands)LennarCorporation GuarantorSubsidiaries Non-GuarantorSubsidiaries ConsolidatingAdjustments TotalRevenues: Lennar Homebuilding$— 8,466,945 — — 8,466,945Lennar Financial Services— 194,993 445,535 (20,001) 620,527Rialto— — 221,923 — 221,923Lennar Multifamily— — 164,639 (26) 164,613Total revenues— 8,661,938 832,097 (20,027) 9,474,008Cost and expenses: Lennar Homebuilding— 7,231,495 49,327 (15,983) 7,264,839Lennar Financial Services— 181,805 316,003 (5,076) 492,732Rialto— — 223,933 (1,058) 222,875Lennar Multifamily— — 191,302 — 191,302Corporate general and administrative210,377 806 — 5,061 216,244Total costs and expenses210,377 7,414,106 780,565 (17,056) 8,387,992Lennar Homebuilding equity in earnings from unconsolidatedentities— 49,134 14,239 — 63,373Lennar Homebuilding other income (expense), net(1,124) 4,903 17,660 (2,823) 18,616Other interest expense(5,794) (12,454) — 5,794 (12,454)Rialto equity in earnings from unconsolidated entities— — 22,293 — 22,293Rialto other income, net— — 12,254 — 12,254Lennar Multifamily equity in earnings from unconsolidatedentities— — 19,518 — 19,518Earnings (loss) before income taxes(217,295) 1,289,415 137,496 — 1,209,616Benefit (provision) for income taxes71,099 (412,301) (49,214) — (390,416)Equity in earnings from subsidiaries949,090 51,956 — (1,001,046) —Net earnings (including net earnings attributable tononcontrolling interests)802,894 929,070 88,282 (1,001,046) 819,200Less: Net earnings attributable to noncontrolling interests— — 16,306 — 16,306Net earnings attributable to Lennar$802,894 929,070 71,976 (1,001,046) 802,894Other comprehensive income, net of tax: Net unrealized loss on securities available-for-sale$— — (65) — (65)Reclassification adjustments for gains included in net earnings$— — (26) — (26)Other comprehensive income attributable to Lennar$802,894 929,070 71,885 (1,001,046) 802,803Other comprehensive earnings attributable to noncontrollinginterests$— — 16,306 — 16,306119Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Consolidating Statement of Operations and Comprehensive Income (Loss)Year Ended November 30, 2014(In thousands)LennarCorporation GuarantorSubsidiaries Non-GuarantorSubsidiaries ConsolidatingAdjustments TotalRevenues: Lennar Homebuilding$— 7,023,678 1,452 — 7,025,130Lennar Financial Services— 161,145 315,123 (21,887) 454,381Rialto— — 230,521 — 230,521Lennar Multifamily— — 69,780 — 69,780Total revenues— 7,184,823 616,876 (21,887) 7,779,812Cost and expenses: Lennar Homebuilding— 5,961,062 9,444 (8,477) 5,962,029Lennar Financial Services— 153,975 233,162 (12,894) 374,243Rialto— — 249,114 — 249,114Lennar Multifamily— — 95,227 — 95,227Corporate general and administrative172,099 — — 5,062 177,161Total costs and expenses172,099 6,115,037 586,947 (16,309) 6,857,774Lennar Homebuilding equity in earnings (loss) fromunconsolidated entities— (4,140) 3,785 — (355)Lennar Homebuilding other income, net254 4,726 2,762 (216) 7,526Other interest expense(5,794) (36,551) — 5,794 (36,551)Rialto equity in earnings from unconsolidated entities— — 59,277 — 59,277Rialto other income, net— — 3,395 — 3,395Lennar Multifamily equity in earnings from unconsolidatedentities— — 14,454 — 14,454Earnings (loss) before income taxes(177,639) 1,033,821 113,602 — 969,784Benefit (provision) for income taxes61,818 (357,277) (45,632) — (341,091)Equity in earnings from subsidiaries754,737 39,691 — (794,428) —Net earnings (including net loss attributable to noncontrollinginterests)638,916 716,235 67,970 (794,428) 628,693Less: Net loss attributable to noncontrolling interests— — (10,223) — (10,223)Net earnings attributable to Lennar$638,916 716,235 78,193 (794,428) 638,916Other comprehensive income, net of tax: Net unrealized loss on securities available-for-sale$— — 130 — 130Other comprehensive income attributable to Lennar$638,916 716,235 78,323 (794,428) 639,046Other comprehensive loss attributable to noncontrollinginterests$— — (10,223) — (10,223)120Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Consolidating Statement of Cash FlowsYear Ended November 30, 2016(In thousands)LennarCorporation GuarantorSubsidiaries Non-GuarantorSubsidiaries ConsolidatingAdjustments TotalCash flows from operating activities: Net earnings (including net earnings attributable tononcontrolling interests)$911,844 1,007,795 125,259 (1,131,807) 913,091Distributions of earnings from guarantor and non-guarantor subsidiaries1,068,529 63,278 — (1,131,807) —Other adjustments to reconcile net earnings (includingnet earnings attributable to noncontrolling interests) tonet cash provided by (used in) operating activities(1,083,418) (231,877) (221,799) 1,131,807 (405,287)Net cash provided by (used in) operating activities896,955 839,196 (96,540) (1,131,807) 507,804Cash flows from investing activities: Proceeds from sale of operating properties— 25,288 — — 25,288(Investments in and contributions to) and distributionsof capital from unconsolidated entities, net— (139,533) 36,962 — (102,571)Proceeds from sales of real estate owned— — 97,871 — 97,871Receipts of principal payments on loans receivable andother— — 84,433 — 84,433Originations of loans receivable— — (56,507) — (56,507)Purchases of commercial mortgage-backed securitiesbonds— — (42,436) — (42,436)Other(11,709) (56,627) (23,579) — (91,915)Distributions of capital from guarantor and non-guarantor subsidiaries40,000 34,000 — (74,000) —Intercompany(787,185) — — 787,185 —Net cash provided by (used in) investing activities(758,894) (136,872) 96,744 713,185 (85,837)Cash flows from financing activities: Net borrowings under warehouse facilities— 116 107,349 — 107,465Proceeds from senior notes and debt issuance costs495,974 — (1,690) — 494,284Redemption of senior notes(250,000) — — — (250,000)Conversions and exchanges of convertible senior notes(234,028) — — (234,028)Principal payments on Rialto notes payable includingstructured notes— — (39,026) — (39,026)Net payments on other borrowings— (165,463) (8,342) — (173,805)Net payments related to noncontrolling interests— — (127,057) — (127,057)Excess tax benefits from share-based awards7,039 — — — 7,039Common stock: Issuances19,471 — — — 19,471Repurchases(19,902) — — — (19,902)Dividends(35,324) (1,047,795) (158,012) 1,205,807 (35,324)Intercompany— 551,840 235,345 (787,185) —Net cash provided by (used in) financing activities(16,770) (661,302) 8,567 418,622 (250,883)Net increase in cash and cash equivalents121,291 41,022 8,771 — 171,084Cash and cash equivalents at beginning of period575,821 336,048 246,576 — 1,158,445Cash and cash equivalents at end of period$697,112 377,070 255,347 — 1,329,529121Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Consolidating Statement of Cash FlowsYear Ended November 30, 2015(In thousands)LennarCorporation GuarantorSubsidiaries Non-GuarantorSubsidiaries ConsolidatingAdjustments TotalCash flows from operating activities: Net earnings (including net earnings attributable tononcontrolling interests)$802,894 929,070 88,282 (1,001,046) 819,200Distributions of earnings from guarantor and non-guarantor subsidiaries949,090 51,956 — (1,001,046) —Other adjustments to reconcile net earnings (includingnet earnings attributable to noncontrolling interests) tonet cash provided by (used in) operating activities(782,575) (861,284) (596,033) 1,001,046 (1,238,846)Net cash provided by (used in) operating activities969,409 119,742 (507,751) (1,001,046) (419,646)Cash flows from investing activities: Proceeds from sale of operating properties— 73,732 — — 73,732Investments in and contributions to unconsolidatedentities, net of distributions of capital— (90,267) (5,674) — (95,941)Proceeds from sales of real estate owned— — 155,295 — 155,295Receipts of principal payments on loans receivable andother— — 28,389 — 28,389Originations of loans receivable— — (78,703) — (78,703)Other(5,988) (96,180) (78,997) — (181,165)Distributions of capital from guarantor and non-guarantor subsidiaries115,000 115,050 — (230,050) —Intercompany(1,514,775) — — 1,514,775 —Net cash provided by (used in) investing activities(1,405,763) 2,335 20,310 1,284,725 (98,393)Cash flows from financing activities: Net borrowings under warehouse facilities— — 366,290 — 366,290Proceeds from senior notes and debt issuance costs1,137,826 — (2,986) — 1,134,840Redemption of senior notes(500,000) — — — (500,000)Conversions and exchanges of convertible senior notes(212,107) — — — (212,107)Principal payments on Rialto notes payable includingstructured notes— — (58,923) — (58,923)Net payments on other borrowings— (156,490) — — (156,490)Net payments related to noncontrolling interests— — (132,078) — (132,078)Excess tax benefits from share-based awards113 — — — 113Common stock: Issuances9,405 — — — 9,405Repurchases(23,188) — — — (23,188)Dividends(33,192) (1,044,070) (187,026) 1,231,096 (33,192)Intercompany— 1,161,617 353,158 (1,514,775) —Net cash provided by (used in) financing activities378,857 (38,943) 338,435 (283,679) 394,670Net increase (decrease) in cash and cash equivalents(57,497) 83,134 (149,006) — (123,369)Cash and cash equivalents at beginning of period633,318 252,914 395,582 — 1,281,814Cash and cash equivalents at end of period$575,821 336,048 246,576 — 1,158,445122Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Consolidating Statement of Cash FlowsYear Ended November 30, 2014(In thousands)LennarCorporation GuarantorSubsidiaries Non-GuarantorSubsidiaries ConsolidatingAdjustments TotalCash flows from operating activities: Net earnings (including net loss attributable tononcontrolling interests)$638,916 716,235 67,970 (794,428) 628,693Distributions of earnings from guarantor and non-guarantor subsidiaries754,737 39,691 — (794,428) —Other adjustments to reconcile net earnings (includingnet loss attributable to noncontrolling interests) to netcash provided by (used in) operating activities(583,119) (1,108,430) (520,060) 794,428 (1,417,181)Net cash provided by (used in) operating activities810,534 (352,504) (452,090) (794,428) (788,488)Cash flows from investing activities: Proceeds from sale of operating properties— 43,937 — — 43,937Distributions of capital from unconsolidated entities, netof investments in and contributions to— 63,990 55,533 — 119,523Proceeds from sales of real estate owned— — 269,698 — 269,698Receipts of principal payments on loans receivable, net— — 24,019 — 24,019Other(2,347) 19,027 (35,498) — (18,818)Distributions of capital from guarantor and non-guarantor subsidiaries232,200 65,200 — (297,400) —Intercompany(1,515,367) — — 1,515,367 —Net cash provided by (used in) investing activities(1,285,514) 192,154 313,752 1,217,967 438,359Cash flows from financing activities: Net repayments under warehouse facilities— — 389,535 — 389,535Net proceeds from senior notes and structured notes843,300 — 196,180 — 1,039,480Redemption of senior notes(250,000) — — — (250,000)Principal payments on Rialto notes payable— — (75,879) — (75,879)Net payments on other borrowings— (241,539) (23,750) — (265,289)Exercise of land option contracts from anunconsolidated land investment venture— (1,540) — — (1,540)Net payments related to noncontrolling interests— — (142,766) (142,766)Excess tax benefits from share-based awards7,497 — — — 7,497Common stock: Issuances13,599 — — — 13,599Repurchases(20,424) — — — (20,424)Dividends(32,775) (781,435) (310,393) 1,091,828 (32,775)Intercompany— 1,285,786 229,581 (1,515,367) —Net cash provided by financing activities561,197 261,272 262,508 (423,539) 661,438Net increase in cash and cash equivalents86,217 100,922 124,170 — 311,309Cash and cash equivalents at beginning of period547,101 151,992 271,412 — 970,505Cash and cash equivalents at end of period$633,318 252,914 395,582 — 1,281,814123Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)19. Quarterly Data (unaudited) First Second Third Fourth(In thousands, except per share amounts) 2016 Revenues$1,993,664 2,745,815 2,833,894 3,376,626Gross profit from sales of homes$398,946 561,523 551,676 683,519Earnings before income taxes$201,693 327,839 339,558 461,379Net earnings attributable to Lennar$144,080 218,469 235,842 313,453Earnings per share: Basic$0.68 1.01 1.04 1.37Diluted$0.63 0.95 1.01 1.342015 Revenues$1,644,139 2,392,604 2,491,698 2,945,567Gross profit from sales of homes$324,772 495,854 531,362 651,066Earnings before income taxes$176,643 279,810 320,658 432,505Net earnings attributable to Lennar$114,963 183,016 223,312 281,603Earnings per share: Basic$0.56 0.89 1.07 1.34Diluted$0.50 0.79 0.96 1.21Quarterly and year-to-date computations of per share amounts are made independently. Therefore, the sum of per share amounts for the quarters maynot agree with per share amounts for the year.Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.Not applicable.Item 9A. Controls and Procedures.Evaluation of Disclosure Controls and ProceduresOur Chief Executive Officer and Chief Financial Officer participated in an evaluation by our management of the effectiveness of our disclosurecontrols and procedures as of the end of the period covered by this report. Based on their participation in that evaluation, our CEO and CFO concluded thatour disclosure controls and procedures were effective as of November 30, 2016 to ensure that information required to be disclosed in our reports filed orsubmitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in theSecurities and Exchange Commission’s rules and forms, and to ensure that information required to be disclosed in our reports filed or furnished under theSecurities Exchange Act of 1934, as amended, is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allowtimely decisions regarding required disclosures.Our CEO and CFO also participated in an evaluation by our management of any changes in our internal control over financial reporting thatoccurred during the quarter ended November 30, 2016. That evaluation did not identify any changes that have materially affected, or are reasonably likely tomaterially affect, our internal control over financial reporting.Management’s Annual Report on Internal Control Over Financial Reporting and the Report of Independent Registered Public Accounting Firmobtained from Deloitte & Touche LLP relating to the effectiveness of Lennar Corporation’s internal control over financial reporting are included elsewhere inthis document.124Table of ContentsManagement’s Annual Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined inExchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our CEO and CFO, we conducted anevaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of November 30, 2016. Theeffectiveness of our internal control over financial reporting as of November 30, 2016 has been audited by Deloitte & Touche LLP, an independent registeredpublic accounting firm, as stated in their attestation report which is included herein.125Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders of Lennar CorporationWe have audited the internal control over financial reporting of Lennar Corporation and subsidiaries (the "Company") as of November 30, 2016,based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the TreadwayCommission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of theeffectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over FinancialReporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained inall material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures aswe considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive andprincipal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertainto the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of managementand directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or dispositionof the company’s assets that could have a material effect on the financial statements.Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper managementoverride of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation ofthe effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because ofchanges in conditions, or that the degree of compliance with the policies or procedures may deteriorate.In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of November 30, 2016, basedon the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the TreadwayCommission.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidatedfinancial statements as of and for the year ended November 30, 2016 of the Company and our report dated January 20, 2017 expressed an unqualifiedopinion on those financial statements./s/ DELOITTE & TOUCHE LLP Certified Public Accountants Miami, FloridaJanuary 20, 2017126Table of ContentsItem 9B. Other Information.Not applicable.PART IIIItem 10. Directors, Executive Officers and Corporate Governance.The information required by this item for executive officers is set forth under the heading "Executive Officers of Lennar Corporation" in Part I. Wehave adopted a Code of Business Conduct and Ethics that applies to our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer. TheCode of Business Conduct and Ethics is located on our internet web site at www.lennar.com under "Investor Relations – Corporate Governance." We intendto provide disclosure of any amendments or waivers of our Code of Business Conduct and Ethics on our website within four business days following the dateof the amendment or waiver. The other information called for by this item is incorporated by reference to our definitive proxy statement, which will be filedwith the Securities and Exchange Commission not later than March 30, 2017 (120 days after the end of our fiscal year).Item 11. Executive Compensation.The information required by this item is incorporated by reference to our definitive proxy statement, which will be filed with the Securities andExchange Commission not later than March 30, 2017 (120 days after the end of our fiscal year).Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.The information required by this item is incorporated by reference to our definitive proxy statement, which will be filed with the Securities andExchange Commission not later than March 30, 2017 (120 days after the end of our fiscal year), except for the information required by Item 201(d) ofRegulation S-K, which is provided below.The following table summarizes our equity compensation plans as of November 30, 2016:Plan categoryNumber of shares to beissued upon exercise ofoutstanding options,warrants and rights(a) Weighted-averageexercise price ofoutstanding options,warrants and rights (b) Number of sharesremaining available forfuture issuance underequity compensationplans (excluding sharesreflected in column (a))c(1)Equity compensation plans approved by stockholders38,075 $45.83 13,797,140Equity compensation plans not approved by stockholders— — —Total38,075 $45.83 13,797,140(1)Both shares of Class A and Class B common stock may be issued.Item 13. Certain Relationships and Related Transactions, and Director Independence.The information required by this item is incorporated by reference to our definitive proxy statement, which will be filed with the Securities andExchange Commission not later than March 30, 2017 (120 days after the end of our fiscal year).Item 14. Principal Accounting Fees and Services.The information required by this item is incorporated by reference to our definitive proxy statement, which will be filed with the Securities andExchange Commission not later than March 30, 2017 (120 days after the end of our fiscal year).127Table of ContentsPART IVItem 15. Exhibits, Financial Statement Schedules.(a)Documents filed as part of this Report.1.The following financial statements are contained in Item 8:Financial StatementsPage inthis ReportReport of Independent Registered Public Accounting Firm65Consolidated Balance Sheets as of November 30, 2016 and 201566Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended November 30, 2016, 2015 and 201468Consolidated Statements of Equity for the Years Ended November 30, 2016, 2015 and 201469Consolidated Statements of Cash Flows for the Years Ended November 30, 2016, 2015 and 201470Notes to Consolidated Financial Statements712.The following financial statement schedule is included in this Report:Financial Statement SchedulePage inthis ReportReport of Independent Registered Public Accounting Firm132Schedule II—Valuation and Qualifying Accounts133Information required by other schedules has either been incorporated in the consolidated financial statements and accompanying notes or is notapplicable to us.3.The following exhibits are filed with this Report or incorporated by reference:2.1Contribution and Sale Agreement, dated as of July 2, 2015, by and among Five Point Holdings, Inc., Newhall Holding Company, LLC, NewhallIntermediary Holding Company, LLC, Newhall Land Development, LLC, The Shipyard Communities, LLC, UST Lennar HW Scala SF JointVenture, HPSCP Opportunities, L.P., Heritage Fields LLC, Lennar Heritage Fields, LLC, MSD Heritage Fields, LLC, FPC-HF Venture I, LLC,Heritage Fields Capital Co-Investor Member LLC, LNR HF II, LLC, FivePoint Communities Management, Inc., Five Point Communities, LP,Lennar Homes of California, Inc. and Emile Haddad - Incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K,dated July 7, 2015. 2.2Amended and Restated Contribution and Sale Agreement, dated as of July 2, 2015, as amended and restated as of December 17, 2015, by andamong Five Point Holdings, Inc., Newhall Holding Company, LLC, Newhall Intermediary Holding Company, LLC, Newhall LandDevelopment, LLC, The Shipyard Communities, LLC, UST Lennar HW Scala SF Joint Venture, HPSCP Opportunities, L.P., Heritage FieldsLLC, Lennar Heritage Fields, LLC, MSD Heritage Fields, LLC, FPC HF Venture I, LLC, Heritage Fields Capital Co Investor Member LLC, LNRHF II, LLC, Five Point Communities Management, Inc., Five Point Communities, LP, Lennar Homes Of California, Inc., and Emile Haddad -Incorporated by reference to Exhibit 2.2 of the Company’s Current Report on Form 8-K, dated December 21, 2015. 2.3Second Amended and Restated Contribution and Sale Agreement, dated as of July 2, 2015, as amended and restated as of May 2, 2016, by andamong Five Point Holdings, Inc., Newhall Holding Company, LLC, Newhall Intermediary Holding Company, LLC, Newhall LandDevelopment, LLC, The Shipyard Communities, LLC, UST Lennar HW Scala SF Joint Venture, HPSCP Opportunities, L.P., Heritage FieldsLLC, LenFive, LLC, MSD Heritage Fields, LLC, FPC-HF Venture I, LLC, Heritage Fields Capital Co-Investor Member LLC, LNR HF II, LLC,Five Point Communities Management, Inc., Five Point Communities, LP, Lennar Homes of California, Inc. and Emile Haddad - Incorporated byreference to Exhibit 2.1 of the Company’s Current Report on Form 8-K, dated May 2, 2016. 2.4Agreement and Plan of Merger among WCI Communities, Inc., Lennar Corporation, Marlin Green Corp., and Marlin Blue LLC Dated September22, 2016 - Incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K, dated September 22, 2016. 3.1Restated Certificate of Incorporation of the Company, dated January 14, 2015 - Incorporated by reference to Exhibit 3.1 of the Company’sAnnual Report on Form 10-K for the fiscal year ended November 30, 2014. 3.2Bylaws of the Company, as amended effective October 3, 2013 - Incorporated by reference to Exhibit 3.6 of the Company’s Current Report onForm 8-K, dated October 4, 2013. 128Table of Contents4.1Indenture, dated as of December 31, 1997, between Lennar Corporation and Bank One Trust Company, N.A., as trustee - Incorporated byreference to Exhibit 4 of the Company’s Registration Statement on Form S-3, Registration No. 333-45527, filed with the Commission onFebruary 3, 1998. 4.2Indenture, dated April 30, 2009, between Lennar and The Bank of New York Mellon, as trustee (relating to Lennar’s 12.25% Senior Notes due2017) - Incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K, dated April 30, 2009. 4.3Indenture, dated May 4, 2010, between Lennar and The Bank of New York Mellon, as trustee (relating to Lennar’s 6.95% Senior Notes due2018) - Incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-4, Registration No. 333-167622, filed withthe Commission on June 18, 2010. 4.4Indenture, dated July 20, 2012, between Lennar and The Bank of New York Mellon Trust Company, N.A., as trustee (relating to Lennar’s 4.75%Senior Notes due 2017) - Incorporated by reference to Exhibit 4.1 of the Company's Registration Statement on Form S-4, Registration No. 333-183755, filed with the Commission on September 6, 2012. 4.5Indenture, dated October 23, 2012, between Lennar and The Bank of New York Mellon Trust Company, N.A., as trustee (relating to Lennar’s4.750% Senior Notes due 2022) - Incorporated by reference to Exhibit 4.12 of the Company's Annual Report on Form 10-K, for the fiscal yearended November 30, 2012. 4.6Indenture, dated February 4, 2013, between Lennar and The Bank of New York Mellon Trust Company, N.A., as trustee (relating to Lennar’s4.125% Senior Notes due 2018) - Incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 10-Q for the quarterended February 28, 2013. 4.7Eighth Supplemental Indenture, dated as of February 12, 2014, among Lennar Corporation, each of the guarantors identified therein and TheBank of New York Mellon, as trustee, including the form of 4.50% Senior Notes due 2019 - Incorporated by reference to Exhibit 4.12 of theCompany’s Current Report on Form 8-K, dated February 13, 2014. 4.8Ninth Supplemental Indenture, dated as of November 25, 2014, among Lennar Corporation, each of the guarantors identified therein and TheBank of New York Mellon, as trustee, including the form of 4.500% Senior Notes due 2019 - Incorporated by reference to Exhibit 4.13 of theCompany’s Current Report on Form 8-K, dated November 25, 2014. 4.9Tenth Supplemental Indenture, dated as of April 28, 2015, among Lennar Corporation, each of the guarantors identified therein and The Bankof New York Mellon, as trustee, including the form of 4.750% Senior Notes due 2025 - Incorporated by reference to Exhibit 4.14 of theCompany’s Current Report on Form 8-K, dated April 29, 2015. 4.10Eleventh Supplemental Indenture, dated as of November 5, 2015, among Lennar Corporation, each of the guarantors identified therein and TheBank of New York Mellon, as trustee, including the form of 4.875% Senior Notes due 2023 - Incorporated by reference to Exhibit 4.15 of theCompany’s Current Report on Form 8-K, dated November 6, 2015. 4.11Twelfth Supplemental Indenture, dated as of March 4, 2016, among Lennar Corporation, each of the guarantors identified therein and The Bankof New York Mellon, as trustee, including the form of 4.750% Senior Notes due 2021 - Incorporated by reference to Exhibit 4.16 of theCompany’s Current Report on Form 8-K, dated March 4, 2016. 10.1* Lennar Corporation 2007 Equity Incentive Plan, as amended effective January 12, 2012 - Incorporated by reference to Exhibit 1 of theCompany’s Proxy Statement on Schedule 14A dated March 2, 2012. 10.2* Lennar Corporation 2012 Incentive Compensation Plan - Incorporated by reference to Exhibit 2 of the Company’s Proxy Statement on Schedule14A dated March 2, 2012. 10.3*Lennar Corporation Nonqualified Deferred Compensation Plan - Incorporated by reference to Exhibit 10 of the Company’s Quarterly Report onForm 10-Q for the quarter ended August 31, 2002. 10.4*Lennar Corporation 2016 Equity Incentive Plan - Incorporated by reference to Exhibit A of the Company’s Definitive Proxy Statement onSchedule 14A, filed with the Commission on March 2, 2016. 10.5*Lennar Corporation 2016 Incentive Compensation Plan - Incorporated by reference to Exhibit B of the Company’s Definitive Proxy Statementon Schedule 14A, filed with the Commission on March 2, 2016. 10.6*Aircraft Time-Sharing Agreement, dated August 17, 2005, between U.S. Home Corporation and Stuart Miller -Incorporated by reference toExhibit 10.1 of the Company’s Current Report on Form 8-K, dated August 17, 2005. 10.7*Amendment No. 1 to Aircraft Time-Sharing Agreement, dated September 1, 2005, between U.S. Home Corporation and Stuart Miller -Incorporated by reference to Exhibit 10.16 of the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2005. 129Table of Contents10.8Amended and Restated Aircraft Dry Lease Agreement, dated December 1, 2008, between U.S. Home Corporation and Stuart Miller -Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, dated February 18, 2009. 10.9*Aircraft Time-Sharing Agreement, dated January 26, 2011, between U.S. Home Corporation and Richard Beckwitt -Incorporated by reference toExhibit 10.22 of the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2010. 10.10Membership Interest Purchase Agreement, dated as of November 30, 2007, by and among Lennar, Lennar Homes of California, Inc., the Sellersnamed in the agreement and MS Rialto Residential Holdings, LLC. - Incorporated by reference to Exhibit 10.23 of the Company’s AnnualReport on Form 10-K for the fiscal year ended November 30, 2007. 10.11Third Amended and Restated Credit Agreement, dated as of April 17, 2015, among Lennar Corporation, as borrower, JPMorgan Chase Bank,N.A., as swingline lender, issuing lender, and administrative agent, the several lenders from time to time parties thereto, and the other parties andagents therein - Incorporated by reference to Exhibit 10.21 of the Company’s Current Report on Form 8-K, dated April 20, 2015. 10.12Third Amended and Restated Guarantee Agreement, dated as of April 17, 2015, among certain of Lennar Corporation’s subsidiaries in favor ofguaranteed parties referred to therein - Incorporated by reference to Exhibit 10.22 of the Company’s Current Report on Form 8-K, dated April20, 2015. 10.13Fourth Amended and Restated Credit Agreement, dated as of June 24, 2016, among Lennar Corporation, as borrower, JPMorgan Chase Bank,N.A., as swingline lender, issuing lender, and administrative agent, the several lenders from time to time parties thereto, and the other parties andagents therein - Incorporated by reference to Exhibit 10.19 of the Company’s Current Report on Form 8-K, dated June 24, 2016. 10.14Fourth Amended and Restated Guarantee Agreement, dated as of June 24, 2016, among certain of Lennar Corporation’s subsidiaries in favor ofguaranteed parties referred to therein - Incorporated by reference to Exhibit 10.20 of the Company’s Current Report on Form 8-K, dated June 24,2016. 10.15Indenture, dated November 14, 2013, among Rialto Holdings, LLC, Rialto Corporation, the Guarantors named therein and Wells Fargo Bank,National Association, as trustee, including the form of 7.000% Senior Notes due 2018 - Incorporated by reference to Exhibit 10.20 of theCompany’s Current Report on Form 8-K, dated November 14, 2013. 10.16*2015 Award Agreements for Stuart Miller, Rick Beckwitt, Jonathan Jaffe, Bruce Gross and Mark Sustana - Incorporated by reference to Exhibit10.18 of the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2014. 10.17*2016 Award Agreements for Stuart Miller, Rick Beckwitt, Jonathan Jaffe, Bruce Gross and Mark Sustana - Incorporated by reference to Exhibit10.16 of the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2015. 10.18*2017 Award Agreements for Stuart Miller, Rick Beckwitt, Jonathan Jaffe, Bruce Gross and Mark Sustana.** 10.19Form of Aircraft Time Sharing Agreement, dated February 12, 2015, between U.S. Home Corporation and Lessee -Incorporated by reference toExhibit 10.19 of the Company’s Current Report on Form 8-K, dated February 19, 2015. 10.20Amendment, dated February 12, 2015, to Amended and Restated Aircraft Dry Lease Agreement, dated December 1, 2008, among Lennar AircraftI, LLC, U.S. Home Corporation and Stuart Miller - Incorporated by reference to Exhibit 10.20 of the Company’s Current Report on Form 8-K,dated February 19, 2015. 21List of subsidiaries.** 23Consent of Independent Registered Public Accounting Firm.** 31.1Rule 13a-14a/15d-14(a) Certification of Stuart Miller.** 31.2Rule 13a-14a/15d-14(a) Certification of Bruce Gross.** 32Section 1350 Certifications of Stuart Miller and Bruce Gross.** 101The following financial statements from Lennar Corporation Annual Report on Form 10-K for the year ended November 30, 2016, filed onJanuary 20, 2017, formatted in XBRL (Extensible Business Reporting Language); (i) Consolidated Balance Sheets, (ii) Consolidated Statementsof Operations and Comprehensive Income (Loss), (iii) Consolidated Statements of Equity (iv) Consolidated Statements of Cash Flows and (v)the Notes to Consolidated Financial Statements.* Management contract or compensatory plan or arrangement.** Filed herewith.130Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signedon its behalf by the undersigned, thereunto duly authorized. LENNAR CORPORATION /S/ STUART MILLER Stuart Miller Chief Executive Officer and Director Date:January 20, 2017Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated:Principal Executive Officer: Stuart Miller/S/ STUART MILLER Chief Executive Officer and DirectorDate:January 20, 2017 Principal Financial Officer: Bruce Gross/S/ BRUCE GROSS Vice President and Chief Financial OfficerDate:January 20, 2017 Principal Accounting Officer: David M. Collins/S/ DAVID M. COLLINS ControllerDate:January 20, 2017 Directors: Irving Bolotin/S/ IRVING BOLOTIN Date:January 20, 2017 Steven L. Gerard/S/ STEVEN L. GERARD Date:January 20, 2017 Theron I. ("Tig") Gilliam, Jr./s/ THERON I. ("TIG") GILLIAM, JR. Date:January 20, 2017 Sherrill W. Hudson/S/ SHERRILL W. HUDSON Date:January 20, 2017 Sidney Lapidus/S/ SIDNEY LAPIDUS Date:January 20, 2017 Teri McClure/S/ TERI MCCLURE Date:January 20, 2017 Armando Olivera/S/ ARMANDO OLIVERA Date:January 20, 2017 Jeffrey Sonnenfeld/S/ JEFFREY SONNENFELD Date:January 20, 2017131Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders of Lennar CorporationWe have audited the consolidated financial statements of Lennar Corporation and subsidiaries (the "Company") as of November 30, 2016 and 2015, and foreach of the three years in the period ended November 30, 2016, and the Company’s internal control over financial reporting as of November 30, 2016, andhave issued our reports thereon dated January 20, 2017; such consolidated financial statements and reports are included elsewhere in this Form 10-K. Ouraudits also included the consolidated financial statement schedule of the Company listed in Item 15. This consolidated financial statement schedule is theresponsibility of the Company’s management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financialstatement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, theinformation set forth therein./s/ DELOITTE & TOUCHE LLP Certified Public Accountants Miami, FloridaJanuary 20, 2017132Table of ContentsLENNAR CORPORATION AND SUBSIDIARIESSchedule II—Valuation and Qualifying AccountsYears Ended November 30, 2016, 2015 and 2014 Additions (In thousands)Beginningbalance Charged to costs andexpenses Charged (credited) toother accounts Deductions EndingbalanceYear ended November 30, 2016 Allowances deducted from assets to which theyapply: Allowances for doubtful accounts andnotes and other receivables$768 125 (88) (477) 328Allowance for loan losses and loansreceivable$39,486 18,818 — (24,729) 33,575Allowance against net deferred tax assets$5,945 — — (172) 5,773Year ended November 30, 2015 Allowances deducted from assets to which theyapply: Allowances for doubtful accounts andnotes and other receivables$3,257 370 (2,528) (331) 768Allowance for loan losses and loansreceivable$62,104 11,465 — (34,083) 39,486Allowance against net deferred tax assets$8,029 — — (2,084) 5,945Year ended November 30, 2014 Allowances deducted from assets to which theyapply: Allowances for doubtful accounts andnotes and other receivables$3,067 207 323 (340) 3,257Allowance for loan losses and loansreceivable$24,687 57,207 — (19,790) 62,104Allowance against net deferred tax assets$12,706 — — (4,677) 8,029133Exhibit 10.18LENNAR CORPORATION2017 TARGET BONUS OPPORTUNITYCHIEF EXECUTIVE OFFICERNAMETARGET AWARD OPPORTUNITY [1]Stuart Miller1.00% of Lennar Corporation Pretax Income [2][1] The 2017 Target Bonus Opportunity program, under the 2016 Incentive Compensation Plan, is intended to encourage superior performance andachievement of the Company’s strategic business objectives. The bonus (if any) awarded under this plan may be adjusted downward at the sole discretion ofthe Compensation Committee of the Board of Directors, based on its assessment of the quantitative and qualitative performance of the CEO. Factors that maycause an adjustment include, but are not limited to, a comparison of the Company’s actual results (sales, closings, starts, etc) to budget, inventorymanagement, corporate governance, customer satisfaction, and peer/competitor comparisons.[2] Per our 2016 Incentive Compensation Plan (the “Plan”), Pretax income shall take into account and adjust for goodwill charges, losses or expenses on earlyretirement of debt, impairment charges, and acquisition costs related to the purchase or merger of a public company, in accordance with the Plan. PretaxIncome is calculated as Net Earnings attributable to Lennar plus/minus income tax expense/benefit.PAYMENTS•The payment of any bonus shall be made no later than April 15th of the year following the fiscal year to which the bonus calculation applies, or if suchday is not a business day, the next business day.•100% of the bonus payment is contingent on the recipient being employed with the Company on the applicable payment date. No bonus will be earnedor paid unless the participant remains employed in good standing through such date.My participation in this 2017 Target Bonus Opportunity program shall not constitute a contract of employment or for wages between me and the Company orotherwise entitle me to remain in the employ of the Company. The Target Bonus Opportunity will be adjusted annually to be in alignment with Companygoals.I affirm that the Alternative Dispute Resolution Policy set forth in Section 1.8 of the Associate Reference Guide shall apply to and govern all disputes 1)under this Target Bonus Opportunity and 2) related to my employment.I also understand and agree that for twelve (12) months following termination of my employment with Lennar, I will not, directly or indirectly, employ oroffer employment to any Lennar Associate or solicit, recruit, influence or encourage any Lennar Associate to terminate his or her employment with Lennar.Lennar Associate shall mean any person who is, or who during the three (3) month period prior to such time had been, an employee of Lennar.The Company and Associate acknowledge and agree that bonuses are not automatic, but are awarded for excellent individual performance, not just excellentmarket conditions. Therefore, the Compensation Committee of the Board of Directors may reduce any bonus amount at its sole discretion under anycircumstance, and all such decisions will be final and binding./S/ STUART MILLER /S/ STEVEN L. GERARD1/17/2017 1/12/2017Stuart MillerChief Executive OfficerLennar Corporation Steven GerardChairman, Compensation CommitteeLennar CorporationLENNAR CORPORATION2017 TARGET BONUS OPPORTUNITYPRESIDENTNAMETARGET AWARD OPPORTUNITY [1]Rick Beckwitt0.92% of Lennar Corporation Pretax Income [2][1] The 2017 Target Bonus Opportunity program, under the 2016 Incentive Compensation Plan, is intended to encourage superior performance andachievement of the Company’s strategic business objectives. The bonus (if any) awarded under this plan may be adjusted downward at the sole discretion ofthe Compensation Committee of the Board of Directors, based on its assessment of the quantitative and qualitative performance of the Associate. Factors thatmay cause an adjustment include, but are not limited to, a comparison of the Company’s actual results (sales, closings, starts, etc) to budget, inventorymanagement, corporate governance, customer satisfaction, and peer/competitor comparisons.[2] Per our 2016 Incentive Compensation Plan (the “Plan”), Pretax income shall take into account and adjust for goodwill charges, losses or expenses on earlyretirement of debt, impairment charges, and acquisition costs related to the purchase or merger of a public company, in accordance with the Plan. PretaxIncome is calculated as Net Earnings attributable to Lennar plus/minus income tax expense/benefit.PAYMENTS•The payment of any bonus shall be made no later than April 15th of the year following the fiscal year to which the bonus calculation applies, or if suchday is not a business day, the next business day.•100% of the bonus payment is contingent on the recipient being employed with the Company on the applicable payment date. No bonus will be earnedor paid unless the participant remains employed in good standing through such date.My participation in this 2017 Target Bonus Opportunity program shall not constitute a contract of employment or for wages between me and the Company orotherwise entitle me to remain in the employ of the Company. The Target Bonus Opportunity will be adjusted annually to be in alignment with Companygoals.I affirm that the Alternative Dispute Resolution Policy set forth in Section 1.8 of the Associate Reference Guide shall apply to and govern all disputes 1)under this Target Bonus Opportunity and 2) related to my employment.I also understand and agree that for twelve (12) months following termination of my employment with Lennar, I will not, directly or indirectly, employ oroffer employment to any Lennar Associate or solicit, recruit, influence or encourage any Lennar Associate to terminate his or her employment with Lennar.Lennar Associate shall mean any person who is, or who during the three (3) month period prior to such time had been, an employee of Lennar.The Company and Associate acknowledge and agree that bonuses are not automatic, but are awarded for excellent individual performance, not just excellentmarket conditions. Therefore, the Compensation Committee of the Board of Directors may reduce any bonus amount at its sole discretion under anycircumstance, and all such decisions will be final and binding./S/ RICK BECKWITT /S/ STUART MILLER1/12/2017 1/17/2017Rick BeckwittPresidentLennar Corporation Stuart MillerChief Executive OfficerLennar CorporationLENNAR CORPORATION2017 TARGET BONUS OPPORTUNITYCHIEF OPERATING OFFICERNAMETARGET AWARD OPPORTUNITY [1]Jon Jaffe0.92% of Lennar Corporation Pretax Income [2][1] The 2017 Target Bonus Opportunity program, under the 2016 Incentive Compensation Plan, is intended to encourage superior performance andachievement of the Company’s strategic business objectives. The bonus (if any) awarded under this plan may be adjusted downward at the sole discretion ofthe Compensation Committee of the Board of Directors, based on its assessment of the quantitative and qualitative performance of the Associate. Factors thatmay cause an adjustment include, but are not limited to, a comparison of the Company’s actual results (sales, closings, starts, etc) to budget, inventorymanagement, corporate governance, customer satisfaction, and peer/competitor comparisons.[2] Per our 2016 Incentive Compensation Plan (the “Plan”), Pretax income shall take into account and adjust for goodwill charges, losses or expenses on earlyretirement of debt, impairment charges, and acquisition costs related to the purchase or merger of a public company, in accordance with the Plan. PretaxIncome is calculated as Net Earnings attributable to Lennar plus/minus income tax expense/benefit.PAYMENTS•The payment of any bonus shall be made no later than April 15th of the year following the fiscal year to which the bonus calculation applies, or if suchday is not a business day, the next business day.•100% of the bonus payment is contingent on the recipient being employed with the Company on the applicable payment date. No bonus will be earnedor paid unless the participant remains employed in good standing through such date.My participation in this 2017 Target Bonus Opportunity program shall not constitute a contract of employment or for wages between me and the Company orotherwise entitle me to remain in the employ of the Company. The Target Bonus Opportunity will be adjusted annually to be in alignment with Companygoals.I affirm that the Alternative Dispute Resolution Policy set forth in Section 1.8 of the Associate Reference Guide shall apply to and govern all disputes 1)under this Target Bonus Opportunity and 2) related to my employment.I also understand and agree that for twelve (12) months following termination of my employment with Lennar, I will not, directly or indirectly, employ oroffer employment to any Lennar Associate or solicit, recruit, influence or encourage any Lennar Associate to terminate his or her employment with Lennar.Lennar Associate shall mean any person who is, or who during the three (3) month period prior to such time had been, an employee of Lennar.The Company and Associate acknowledge and agree that bonuses are not automatic, but are awarded for excellent individual performance, not just excellentmarket conditions. Therefore, the Compensation Committee of the Board of Directors may reduce any bonus amount at its sole discretion under anycircumstance, and all such decisions will be final and binding./S/ JON JAFFE /S/ STUART MILLER1/11/2017 1/17/2017Jon JaffeChief Operating OfficerLennar Corporation Stuart MillerChief Executive OfficerLennar Corporation••••••LENNAR CORPORATION2017 TARGET BONUS OPPORTUNITYSR. CORPORATE MANAGEMENT ASSOCIATESNAMEDEPARTMENTTARGET AWARD OPPORTUNITY [1]Bruce GrossExecutive100% of base salary + 1.00% of LFS Pretax IncomeThe following are measured to determine % of target paid out:PERFORMANCE CRITERIA (see definitions section for more detail)PERCENT OF TARGETAWARDPERFORMANCE LEVELS/ TARGET BONUS OPPORTUNITYTHRESHOLD% OF TARGETIndividual Performance — Based on annual Performance Appraisal reviewdetermined at the end of the fiscal year by current supervisor.60%Good Very Good Excellent20%40%60%Corporate Governance, Company Policy and Procedure Adherence, andInternal Audit Evaluation — As determined by the Corporate GovernanceCommittee40%Good Very Good Excellent10%25%40%TOTAL [1]100% ADDITIONAL BONUS POTENTIAL: LFS Pretax Income1.00%1.00% of LFS Pretax IncomePretax Achievement vs. Plan Upside Potential [2]Up to +80%Exceeding Business Plan Profitability [2]Amount and Success of Public Debt RaisedSuccessful WCI Integration & maximizing synergiesEstablish Online Title SolutionSuccessfully grow Next Gen program in Corporate and LFSOther Strategic Transactions[1] The 2017 Target Bonus Opportunity is intended to encourage superior performance and achievement of the Company’s strategic business objectives. The bonus (if any) awardedunder this plan may be adjusted downward at the sole discretion of the Compensation Committee of the Board of Directors, based on its assessment of the quantitative and qualitativeperformance of the associate. Factors that may cause an adjustment include, but are not limited to, a comparison of the associate’s performance to others in the program, economic ormarket considerations, etc.[2] Per our 2016 Incentive Compensation Plan (the “Plan”), Pretax income shall take into account and adjust for goodwill charges, losses or expenses on early retirement of debt,impairment charges, and acquisition costs related to the purchase or merger of a public company, in accordance with the Plan. Pretax Income is calculated as Net Earnings attributableto Lennar plus/minus income tax expense/benefit.PAYMENTS•The payment of any bonus shall be made no later than April 15th of the year following the fiscal year to which the bonus calculation applies, or if such day is not a business day,the next business day.•100% of the bonus payment is contingent on the recipient being employed with the Company on the applicable payment date. No bonus will be earned or paid unless theparticipant remains employed in good standing through such date.My participation in this 2017 Target Bonus Opportunity shall not constitute a contract of employment or for wages between me and the Company or otherwise entitle me to remain inthe employ of the Company. The Target Bonus Opportunity will be adjusted annually to be in alignment with Company goals.I affirm that the Alternative Dispute Resolution Policy set forth in Section 1.8 of the Associate Reference Guide shall apply to and govern all disputes 1) under this Target BonusOpportunity and 2) related to my employment.I also understand and agree that for twelve (12) months following termination of my employment with Lennar, I will not, directly or indirectly, employ or offer employment to anyLennar Associate or solicit, recruit, influence or encourage any Lennar Associate to terminate his or her employment with Lennar. Lennar Associate shall mean any person who is, orwho during the three (3) month period prior to such time had been, an employee of Lennar.The Company and Associate acknowledge and agree that bonuses are not automatic, but are awarded for excellent individual performance, not just excellent market conditions.Therefore, the Compensation Committee of the Board of Directors may reduce any bonus amount at its sole discretion under any circumstance, and all such decisions will be final andbinding./S/ BRUCE GROSS /S/ STUART MILLER /S/ RICK BECKWITT1/12/2017 1/17/2017 1/12/2017Bruce GrossChief Financial OfficerLennar Corporation Stuart MillerChief Executive OfficerLennar Corporation Rick BeckwittPresidentLennar Corporation••••LENNAR CORPORATION2017 TARGET BONUS OPPORTUNITYSR. CORPORATE MANAGEMENT ASSOCIATESNAMEDEPARTMENTTARGET AWARD OPPORTUNITY [1]Mark SustanaLegal100% of base salaryThe following are measured to determine % of target paid out:PERFORMANCE CRITERIA (see definitions section for more detail)PERCENT OF TARGETAWARDPERFORMANCE LEVELS/ TARGET BONUS OPPORTUNITYTHRESHOLD% OF TARGETIndividual Performance — Based on annual Performance Appraisalreview determined at the end of the fiscal year by current supervisor.60%Good Very Good Excellent20%40%60%Corporate Governance, Company Policy and Procedure Adherence,and Internal Audit Evaluation — As determined by the CorporateGovernance Committee40%Good Very Good Excellent10%25%40%TOTAL [1]100% UPSIDE POTENTIAL: Based on Achievement of Outperformance GoalsUp to +80%Exceeding Business Plan Profitability [2]Successful WCI Integration & maximizing synergiesTightly Managing Legal ExpensesSuccessful Resolution of Large Legal Cases[1] The 2017 Target Bonus Opportunity is intended to encourage superior performance and achievement of the Company’s strategic business objectives. The bonus (if any) awardedunder this plan may be adjusted downward at the sole discretion of the Compensation Committee of the Board of Directors, based on its assessment of the quantitative and qualitativeperformance of the associate. Factors that may cause an adjustment include, but are not limited to, a comparison of the associate’s performance to others in the program, economic ormarket considerations, etc.[2] Per our 2016 Incentive Compensation Plan (the “Plan”), Pretax income shall take into account and adjust for goodwill charges, losses or expenses on early retirement of debt,impairment charges, and acquisition costs related to the purchase or merger of a public company, in accordance with the Plan. Pretax Income is calculated as Net Earnings attributableto Lennar plus/minus income tax expense/benefit.PAYMENTS•The payment of any bonus shall be made no later than April 15th of the year following the fiscal year to which the bonus calculation applies, or if such day is not a business day,the next business day.•100% of the bonus payment is contingent on the recipient being employed with the Company on the applicable payment date. No bonus will be earned or paid unless theparticipant remains employed in good standing through such date.My participation in this 2017 Target Bonus Opportunity program shall not constitute a contract of employment or for wages between me and the Company or otherwise entitle me toremain in the employ of the Company. The Target Bonus Opportunity will be adjusted annually to be in alignment with Company goals.I affirm that the Alternative Dispute Resolution Policy set forth in Section 1.8 of the Associate Reference Guide shall apply to and govern all disputes 1) under this Target BonusOpportunity and 2) related to my employment.I also understand and agree that for twelve (12) months following termination of my employment with Lennar, I will not, directly or indirectly, employ or offer employment to anyLennar Associate or solicit, recruit, influence or encourage any Lennar Associate to terminate his or her employment with Lennar. Lennar Associate shall mean any person who is, orwho during the three (3) month period prior to such time had been, an employee of Lennar.The Company and Associate acknowledge and agree that bonuses are not automatic, but are awarded for excellent individual performance, not just excellent market conditions.Therefore, the Compensation Committee of the Board of Directors may reduce any bonus amount at its sole discretion under any circumstance, and all such decisions will be final andbinding./S/ MARK SUSTANA /S/ STUART MILLER /S/ BRUCE GROSS1/12/2017 1/17/2017 1/12/2017Mark SustanaGeneral CounselLennar Corporation Stuart MillerChief Executive OfficerLennar Corporation Bruce GrossVice President & Chief Financial OfficerLennar CorporationExhibit 21LIST OF SUBSIDARIES AS OF NOVEMBER 30, 2016Company Name State ofIncorporation DBAs308 Furman, Ltd. TX 360 Developers, LLC FL Ann Arundel Farms, Ltd. TX Aquaterra Utilities, Inc. FL Asbury Woods L.L.C. IL Astoria Options, LLC DE Autumn Creek Development, Ltd. TX Aylon, LLC DE Bainebridge 249, LLC FL Bay Colony Expansion 369, Ltd. TX Bay River Colony Development, Ltd. TX BB Investment Holdings, LLC NV BCI Properties, LLC NV Bellagio Lennar, LLC FL Belle Meade LEN Holdings, LLC FL Belle Meade Partners, LLC FL Bonterra Lennar, LLC FL BPH I, LLC NV Bramalea California, Inc. CA Bressi Gardenlane, LLC DE Builders LP, Inc. DE Cambria L.L.C. IL Candlestick Retail Member, LLC DE Cary Woods, LLC IL Casa Marina Development, LLC FL Caswell Acquisition Group, LLC DE Central Park West Holdings, LLC DE Cherrytree II LLC MD CL Ventures, LLC FL Club Bonterra Lennar, LLC FL Coco Palm 82, LLC FL Colonial Heritage LLC VA Concord Station, LLP FL Club Concord StationCoventry L.L.C. IL CP Red Oak Management, LLC TX CP Red Oak Partners, Ltd. TX CP Vertical Development Co. 1, LLC DE CP/HPS Development Co. GP, LLC DE CP/HPS Development Co.-C, LLC DE CPFE, LLC MD CPHP Development, LLC DE Creekside Crossing, L.L.C. IL 1LIST OF SUBSIDARIES AS OF NOVEMBER 30, 2016Company Name State ofIncorporation DBAsCrest at Fondren Holdings, LLC DE Crest at Fondren Investor, LLC DE Danville Tassajara Partners, LLC DE Darcy-Joliet L.L.C. IL DBJ Holdings, LLC NV DCA Financial, LLC FL DTC Holdings of Florida, LLC FL Durrell 33, LLC NJ Eagle Bend Commercial, LLC CO Eagle Home Mortgage of California, Inc. CA Eagle Mortgage Holdings, LLC DE Edgefield Holdings, LLC DE Escena-PSC, LLC DE Estates Seven, LLC DE EV, LLC MD Evergreen Village LLC DE F&R Florida Homes, LLC FL F&R QVI Home Investments USA, LLC DE Fidelity Guaranty and Acceptance Corp. DE First Texas Fidelity CompanyFive Point Communities Management, Inc. DE Five Point Communities, LP DE FLORDADE LLC FL Fox-Maple Associates, LLC NJ Maple Ridge Asociates, LLCFriendswood Development Company, LLC TX Garco Investments, LLC FL Greystone Construction, Inc. AZ Greystone Homes of Nevada, Inc. DE Greystone Nevada, LLC DE Lennar HomesGreywall Club L.L.C. IL Hammocks Lennar LLC FL Harveston, LLC DE Haverton L.L.C. IL HCC Investors, LLC DE Heathcote Commons LLC VA Heritage of Auburn Hills, L.L.C. MI Hewitts Landing Trustee, LLC MA Home Buyer's Advantage Realty, Inc. TX Homecraft Corporation TX HPS Development Co., LP DE HPS Vertical Development Co., LLC DE HPS Vertical Development Co.-B, LP DE HPS Vertical Development Co.-D/E, LLC DE HPS1 Block 1, LLC DE 2LIST OF SUBSIDARIES AS OF NOVEMBER 30, 2016Company Name State ofIncorporation DBAsHPS1 Block 48-1A, LLC DE HPS1 Block 48-1B, LLC DE HPS1 Block 48-2A, LLC DE HPS1 Block 48-2B, LLC DE HPS1 Block 48-3A, LLC DE HPS1 Block 48-3B, LLC DE HPS1 Block 50, LLC DE HPS1 Block 51, LLC DE HPS1 Block 52, LLC DE HPS1 Block 53, LLC DE HPS1 Block 54, LLC DE HPS1 Block 55, LLC DE HPS1 Block 56/57, LLC DE HTC Golf Club, LLC CO Inactive Companies, LLC FL Independence L.L.C. VA Independence Orlando, LLC FL Isles at Bayshore Club, LLC FL Kendall Hammocks Commercial, LLC FL LAC MOUNTAIN VIEW INVESTOR, LLC DE Lakelands at Easton, L.L.C. MD Lakeside Farm, LLC MD LCD Asante, LLC DE LCI Downtown Doral Investor, LLC DE LCI North DeKalb Investor GP, LLC DE LCI North DeKalb Investor LP, LLC DE Legends Club, LLC FL Legends Golf Club, LLC FL LEN - Belle Meade, LLC FL Len - Little Harbor, LLC DE LEN - OBS Windemere, LLC DE LEN - Palm Vista, LLC FL Len FW Investor, LLC DE LEN Mirada Investor, LLC DE LEN OT Holdings, LLC FL LEN Paradise Cable, LLC FL LEN Paradise Operating, LLC FL Len Paradise, LLC FL LEN-CG South, LLC FL LenCom, LLC DE Lencraft, LLC MD LenFive Sub II, LLC DE LenFive Sub III, LLC DE 3LIST OF SUBSIDARIES AS OF NOVEMBER 30, 2016Company Name State ofIncorporation DBAsLenFive Sub, LLC DE LenFive, LLC DE LENH I, LLC FL Len-Hawks Point, LLC FL Len-MN, LLC DE Lennar Aircraft I, LLC DE Lennar Arizona Construction, Inc. AZ Lennar Arizona, Inc. AZ Lennar Associates Management Holding Company FL Lennar Associates Management, LLC DE Lennar at Jackson, LLC DE Lennar at Marlboro 79, LLC DE Lennar at Monroe, LLC DE Lennar Avenue One, LLC DE Lennar Berkeley, LLC NJ Lennar Bridges, LLC CA Lennar Buffington Colorado Crossing, L.P. TX Lennar Buffington Zachary Scott, L.P. TX Lennar Carolinas, LLC DE Lennar Central Park, LLC DE Lennar Central Region Sweep, Inc. NV Lennar Central Texas, L.P. TX Lennar Chicago, Inc. IL LennarLennar Cobra, LLC DE Lennar Colorado Minerals LLC CO Lennar Colorado, LLC CO Blackstone Country ClubLennar Commercial, LLC DE Lennar Communities Development, Inc. DE Lennar Communities Nevada, LLC NV Lennar Communities of Chicago L.L.C. IL Lennar Communities, Inc. CA Lennar Concord, LLC DE Lennar Construction, Inc. AZ Lennar Courts, LLC FL Lennar Developers, Inc. FL Lennar Ewing, LLC NJ Lennar Family of Builders GP, Inc. DE Lennar Family of Builders Limited Partnership DE Lennar Financial Services, LLC FL Lennar Flamingo, LLC FL Lennar Fresno, Inc. CA Lennar Gardens, LLC FL Lennar Georgia, Inc. GA 4LIST OF SUBSIDARIES AS OF NOVEMBER 30, 2016Company Name State ofIncorporation DBAsLennar Greer Ranch Venture, LLC CA Lennar Heritage Fields, LLC CA Lennar Hingham Holdings, LLC DE Lennar Hingham JV, LLC DE Lennar Homes Holding, LLC DE Lennar Homes NJ, LLC DE Lennar Homes of Arizona, Inc. AZ Lennar Homes of California, Inc. CA LENNAR HOMES OF TENNESSEE, LLC DE Lennar Homes of Texas Land and Construction, Ltd. TX Friendswood Development CompanyLennar Homes of Texas Land and Construction, Ltd. TX Village Builders Land CompanyLennar Homes of Texas Sales and Marketing, Ltd. TX Kingswood Sales AssociatesLennar Homes of Texas Sales and Marketing, Ltd. TX Houston Village Builders, Inc.Lennar Homes of Texas Sales and Marketing, Ltd. TX Friendswood Land Development CompanyLennar Homes of Texas Sales and Marketing, Ltd. TX Bay Oaks Sales AssociatesLennar Homes of Texas Sales and Marketing, Ltd. TX Lennar HomesLennar Homes of Texas Sales and Marketing, Ltd. TX Lennar Homes of TexasLennar Homes of Texas Sales and Marketing, Ltd. TX Lennar Homes of Texas, Inc.Lennar Homes of Texas Sales and Marketing, Ltd. TX U.S. HomeLennar Homes of Texas Sales and Marketing, Ltd. TX U.S. Home of TexasLennar Homes of Texas Sales and Marketing, Ltd. TX U.S. Home of Texas, Inc.Lennar Homes of Texas Sales and Marketing, Ltd. TX NuHome Designs, Inc.Lennar Homes of Texas Sales and Marketing, Ltd. TX Village Builders, Inc.Lennar Homes of Texas Sales and Marketing, Ltd. TX NuHome of Texas, Inc.Lennar Homes of Texas Sales and Marketing, Ltd. TX NuHome DesignsLennar Homes of Texas Sales and Marketing, Ltd. TX NuHome of TexasLennar Homes of Texas Sales and Marketing, Ltd. TX Village BuildersLennar Homes of Texas Sales and Marketing, Ltd. TX Friendswood Development CompanyLennar Homes, LLC FL Baywinds Land Trust D/B/A Club VineyardsLennar Homes, LLC FL Doral ParkLennar Homes, LLC FL Doral Park Joint VentureLennar Homes, LLC FL The Breakers at Lennar's Pembroke IslesLennar Homes, LLC FL Doral Park Country ClubLennar Homes, LLC FL Coco PointeLennar Homes, LLC FL The Point at Lennar's Pembroke IslesLennar Homes, LLC FL The Royal ClubLennar Homes, LLC FL The PalaceLennar Homes, LLC FL Club Pembroke IslesLennar Homes, LLC FL Walnut CreekLennar Homes, LLC FL Lennars The Palms @ Pembroke IslesLennar Homes, LLC FL Walnut Creek ClubLennar Homes, LLC FL Lennar Century 8th Street DevelopersLennar Homes, LLC FL Your Hometown Builder5LIST OF SUBSIDARIES AS OF NOVEMBER 30, 2016Company Name State ofIncorporation DBAsLennar Homes, LLC FL Lennar CommunitiesLennar Homes, LLC FL Verona Trace Club, Inc.Lennar Homes, LLC FL Lake Osborne Trailer RanchLennar Homes, LLC FL Tripson Estates Club, Inc.Lennar Homes, LLC FL Club Carriage PointeLennar Homes, LLC FL Club Tuscany VillageLennar Homes, LLC FL Club Silver PalmsLennar Homes, LLC FL Bent Creek Club, Inc.Lennar Homes, LLC FL U.S. HomeLennar Homes, LLC FL Verona Trace Club, Inc.Lennar Homes, LLC FL Club Malibu BayLennar Homes, LLC FL Copper Creek Club, Inc.Lennar Homes, LLC FL Isles of Bayshore ClubLennar Homes, LLC FL Club MiralagoLennar Homes, LLC FL Club Gardens by the HammocksLennar Homes, LLC FL Club VineyardsLennar Imperial Holdings Limited Partnership DE Lennar International Holding, LLC DE Lennar International, LLC DE Lennar Lakeside Investor, LLC DE Lennar Layton, LLC DE Lennar Long Beach Promenade Partners, LLC DE Lennar Lytle, LLC DE Lennar Mare Island, LLC CA Lennar Marina A Funding, LLC DE Lennar Massachusetts Properties, Inc. DE Lennar MF Holdings, LLC DE Lennar Middletown, LLC NJ Lennar Multifamily BTC Venture GP Subsidiary, LLC DE Lennar Multifamily BTC Venture GP, LLC DE Lennar Multifamily BTC Venture LP, LLC DE Lennar Multifamily BTC Venture Manager, LLC DE Lennar Multifamily Communities, LLC DE LMC a Lennar CompanyLennar Multifamily Venture DC LP DE Lennar New Jersey Properties, Inc. DE Lennar New York, LLC NY Lennar Northeast Properties LLC NJ Lennar Northeast Properties, Inc. NV Lennar Northwest, Inc. DE Lennar OHB, LLC NJ Lennar Pacific Properties Management, Inc. DE Lennar Pacific Properties, Inc. DE Lennar Pacific, Inc. DE 6LIST OF SUBSIDARIES AS OF NOVEMBER 30, 2016Company Name State ofIncorporation DBAsLennar PI Acquisition, LLC NJ Lennar PI Property Acquisition, LLC NJ Lennar PIS Management Company, LLC DE Lennar Plumsted LLC NJ Lennar Point, LLC NJ Lennar Port Imperial South, LLC DE Lennar Realty, Inc. FL Lennar Reno, LLC NV Baker-Coleman CommunitiesLennar Reno, LLC NV Lennar HomesLennar Reno, LLC NV Lennar CommunitiesLennar Rialto Investment LP DE Lennar Riverside West Urban Renewal Company, L.L.C. NJ Lennar Riverside West, LLC DE Lennar Riverwalk, LLC DE Lennar Sacramento, Inc. CA Lennar Sales Corp. CA Lennar Sierra Sunrise, LLC CA Lennar Southland I, Inc. CA Lennar Southwest Holding Corp. NV Lennar Spencer's Crossing, LLC DE Lennar Sun Ridge LLC CA Lennar Texas Holding Company TX Lennar Trading Company, LP TX Lennar Ventures, LLC FL Lennar West Valley, LLC CA Lennar Winncrest, LLC DE Lennar.com Inc. FL Lennar/LNR Camino Palomar, LLC CA Lennar/Shadeland, LLC PA Lennar-Lantana Boatyard, Inc. FL LEN-Ryan 1, LLC FL Len-Verandahs, LLP FL LFS Securities, LLC FL LH Eastwind, LLC FL LH-EH Layton Lakes Estates, LLC AZ LHI Renaissance, LLC FL Club OasisLMC 1001 Olive Investor, LLC DE LMC 144th and Grant Investor, LLC DE LMC 2401 Blake Street Holdings, LLC DE LMC 2401 Blake Street Investor, LLC DE LMC Axis Westminster Holdings, LLC DE LMC Axis Westminster Investor, LLC DE LMC Berkeley I Investor, LLC DE 7LIST OF SUBSIDARIES AS OF NOVEMBER 30, 2016Company Name State ofIncorporation DBAsLMC Berry Hill Lofts Holdings, LLC DE LMC Berry Hill Lofts Investor, LLC DE LMC Boca City Walk Developer, LLC DE LMC Boca City Walk Investor, LLC DE LMC Chandler and McClintock Holdings, LLC DE LMC Charlotte Ballpark Developer, LLC DE LMC Cityville Oak Park Holdings, LLC DE LMC Cityville Oak Park Investor, LLC DE LMC Construction, LLC DE LMC Crest at Park West Holdings, LLC DE LMC Development, LLC DE LMC Emeryville I Investor, LLC DE LMC Emeryville I Lennar Investor, LLC DE LMC Gateway Investor, LLC DE LMC Gateway Venture, LLC DE LMC Gilman Square Investor, LLC DE LMC Hollywood Highland Investor, LLC DE LMC Huntington Crossing Holdings, LLC DE LMC Living TRS, LP DE LMC Living, Inc. CA LMC Living, LLC DE LMC Malden Station Investor, LLC DE LMI Soco Santa Fe, LLCLMC Millenia Investor II, LLC DE LMC Millenia Investor, LLC DE LMC Mountain View Holdings II, LLC DE LMC NE Minneapolis Lot 2 Holdings, LLC DE LMC New Bern Holdings, LLC DE LMC New Bern Investor, LLC DE LMC Oak Park Holdings, LLC DE LMC Parkfield Holdings, LLC DE LMC Parkfield Investor, LLC DE LMC Righters Ferry Holdings, LLC DE LMC River North Holdings, LLC DE LMC San Francisco I Holdings, LLC DE LMC Taylor Street Holdings, LLC DE LMC Venture Developer, LLC DE LMC West Loop Investor, LLC DE LMI - Jacksonville Investor, LLC DE LMI - South Kings Development Investor, LLC DE LMI - West Seattle Holdings, LLC DE LMI - West Seattle Investor, LLC DE LMI - West Seattle, LLC DE LMI (150 OCEAN) INVESTOR, LLC DE 8LIST OF SUBSIDARIES AS OF NOVEMBER 30, 2016Company Name State ofIncorporation DBAsLMI 99 Hudson Developer, LLC DE LMI 99 Hudson Investor, LLC DE LMI Cell Tower Investors, LLC DE LMI City Walk Investor, LLC DE LMI Collegedale Investor, LLC DE LMI Collegedale, LLC DE LMI Contractors, LLC DE LMI Glencoe Dallas Investor, LLC DE LMI Glenview Investor, LLC DE LMI Lakes West Covina Investor, LLC DE LMI Largo Park Investor, LLC DE LMI Las Colinas Station, LLC DE LMI Naperville Investor, LLC DE LMI Pacific Tower, LLC DE LMI Park Central Investor, LLC DE LMI Park Central Two, LLC DE LMI Peachtree Corners Investor, LLC DE LMI Peachtree Corners, LLC DE LMI Pearl Apartment Homes Investor, LLC DE LMI Redwood City Investor, LLC DE LMI TEMPE 601 W. RIO SALADO INVESTOR, LLC DE LMI-AECOM Holdings, LLC DE LMI-AECOM Jersey City, LLC DE LMI-JC Developer, LLC DE LMI-JC, LLC DE LMV 1640 Broadway Holdings, LP DE LMV 1701 Ballard REIT-DC, LP DE LMV 19H Holdings, LP DE LMV 19H REIT, LP DE LMV 19H REIT-DC, LP DE LMV 2026 Madison REIT-DC, LP DE LMV 85 South Union REIT-DC, LP DE LMV Annapolis Holdings, LLC DE LMV Annapolis REIT, LLC DE LMV Annapolis REIT-DC, LP DE LMV Apache Terrace REIT-DC, LP DE LMV ATown REIT-DC, LP DE LMV Bloomington REIT-DC, LP DE LMV Bolingbrook REIT-DC, LP DE LMV Central at McDowell REIT-DC, LP DE LMV East Village I REIT-DC, LP DE LMV Edina REIT-DC, LP DE LMV Interbay Holdings, LLC DE 9LIST OF SUBSIDARIES AS OF NOVEMBER 30, 2016Company Name State ofIncorporation DBAsLMV Little Italy REIT-DC, LP DE LMV M Tower REIT-DC, LP DE LMV Milpitas REIT-DC, LP DE LMV NE Minneapolis REIT-DC, LP DE LMV Oak Park REIT-DC, LP DE LMV One20Fourth REIT-DC, LP DE LMV Tysons REIT-DC, LP DE LMV Vallagio III REIT-DC, LP DE LMV Victory Block G REIT-DC, LP DE LNC at Meadowbrook, LLC IL LNC at Ravenna, LLC IL LNC Communities I, Inc. CO LNC Communities II, LLC CO Fortress Genesee III, LLCLNC Communities III, Inc. CO LNC Communities IV, LLC CO LNC Communities V, LLC CO LNC Communities VI, LLC CO LNC Communities VII, LLC CO LNC Communities VIII, LLC CO LNC Northeast Mortgage, Inc. DE LNC Pennsylvania Realty, Inc. PA Long Beach Development, LLC TX Longleaf Acquisition, LLC FL Lori Gardens Associates II, LLC NJ Lori Gardens Associates III, LLC NJ Lori Gardens Associates, L.L.C. NJ Lorton Station, LLC VA LS College Park, LLC DE LW D'Andrea, LLC DE Madrona Ridge L.L.C. IL Madrona Village L.L.C. IL Madrona Village Mews L.L.C. IL Majestic Woods, LLC NJ Maple and Broadway Holdings, LLC DE Marlin Blue LLC DE Marlin Green Corp. DE Mid-County Utilities, Inc. MD Miralago West Lennar, LLC FL Mission Viejo 12S Venture, LP CA Mission Viejo Holdings, Inc. CA Moffett Meadows Partners, LLC DE NASSA LLC FL NC Properties I, LLC DE 10LIST OF SUBSIDARIES AS OF NOVEMBER 30, 2016Company Name State ofIncorporation DBAsNC Properties II, LLC DE North American Advantage Insurance Services, LLC TX North American Asset Development Corporation CA North American Exchange Company CA North American National Title Solutions, LLC DE North American National Title Solutions, LLC MD North American Services, LLC CA North American Title Agency, Inc. NJ North American Abstract AgencyNorth American Title Alliance, LLC FL North American Title CompanyNorth American Title Company AZ North American Title Company FL North American Title Company IL North American Title Company MN North American Title Company NV North American Title Company MD North American Title Company TX Southwest Land Title CompanyNorth American Title Company of Colorado CO North American Title Company, Inc. CA North American Title Company, LLC OH North American Title Florida Alliance, LLC FL North American Title Group, Inc. FL North American Title Insurance Company CA North American Title, LLC UT Northbridge L.L.C. IL Northeastern Properties LP, Inc. NV OHC/Ascot Belle Meade, LLC FL One SR, L.P. TX Palm Gardens At Doral Clubhouse, LLC FL Palm Gardens at Doral, LLC FL Palm Springs Classic, LLC DE Palm Vista Preserve, LLC FL PD-Len Boca Raton, LLC DE PG Properties Holding, LLC NC Pioneer Meadows Development, LLC NV Pioneer Meadows Investments, LLC NV POMAC, LLC MD Port Imperial South Building 14, LLC NJ Portside Marina Developers, L.L.C. NJ Portside Shipyard Developers, L.L.C. NJ Portside SM Associates, L.L.C. NJ Portside SM Holdings, L.L.C. DE Prestonfield L.L.C. IL Providence Lakes, LLP FL 11LIST OF SUBSIDARIES AS OF NOVEMBER 30, 2016Company Name State ofIncorporation DBAsPT Metro, LLC DE Raintree Village II L.L.C. IL Raintree Village L.L.C. IL Ral-Len BM, LLC DE Ral-Len, LLC DE Renaissance Joint Venture FL RES/CML 2009-1 CO-INVESTMENTS, LP DE RES/CML INVESTMENTS, LLC DE Reserve @ Pleasant Grove II LLC NJ LennarReserve @ Pleasant Grove LLC NJ Reserve at River Park, LLC NJ Reserve at South Harrison, LLC NJ Rialto Capital Advisors of New York, LLC DE Rialto Capital Advisors, LLC DE Rialto Capital Management, LLC DE Rialto Capital Partners, LLC DE Rialto Capital Services, LLC DE Rialto Capital Servicing, LLC DE Rialto CMBS, LLC DE Rialto Corporation DE Rialto Holdings, LLC DE Rialto Investments, LLC DE RIALTO MEZZ HOLDINGS, LLC DE Rialto Mezz Partners GP, LLC DE Rialto Mortgage Finance, LLC DE Rialto Mortgage Investments, LLC DE Rialto Partners GP II, LLC DE Rialto Partners GP, LLC DE Rialto Property Management, Inc. CA Rialto Property Management, LLC DE Rialto REGI, LLC FL Rialto RL CML 2009-1, LLC DE Rialto RL RES 2009-1, LLC DE Rivendell Joint Venture FL Rivenhome Corporation FL RL BB FINANCIAL, LLC FL RL BB-SC CLR V, LLC SC RL BB-SC CLR VI, LLC SC RL CMBS Holdings, LLC DE RL CMBS Investor, LLC DE RL CML 2009-1 Investments, LLC DE RL CML 2009-1, LLC DE RL REGI FINANCIAL, LLC FL 12LIST OF SUBSIDARIES AS OF NOVEMBER 30, 2016Company Name State ofIncorporation DBAsRL RES 2009-1 Investments, LLC DE RL RES 2009-1, LLC DE RL-Regi-SC DDBS, LLC. SC RMF Alliance, LLC DE RMF Commercial, LLC DE RMF Partner, LLC DE RMF PR New York, LLC DE RMF Sub 1, LLC DE RMV, LLC MD Rocking Horse Minerals, LLC CO Rutenberg Homes of Texas, Inc. TX Rutenberg Homes, Inc. FL Rye Hill Company, LLC NY S. Florida Construction II, LLC FL S. Florida Construction III, LLC FL S. Florida Construction, LLC FL San Felipe Indemnity Co., Ltd. Bermuda San Lucia, LLC FL Santa Ana Transit Village, LLC CA Savannah Development, Ltd. TX Savell Gulley Development, LLC TX SC 521 Indian Land Reserve South, LLC DE SC 521 Indian Land Reserve, LLC DE Scarsdale, LTD. TX Schulz Ranch Developers, LLC DE Seminole/70th, LLC FL Siena at Old Orchard L.L.C. IL SimplyTitle Company FL South Development, LLC FL Southbank Holding, LLC FL Spanish Springs Development, LLC NV St. Charles Active Adult Community, LLC MD Stoney Corporation FL Stoney Holdings, LLC FL Stoneybrook Clubhouse, Inc. FL Stoneybrook Joint Venture FL Storey Lake Club, LLC FL Storey Park Club, LLC FL Strategic Holdings, Inc. NV Lennar Communications VenturesStrategic Technologies, LLC FL Strategic Cable Technologies - Texas, Inc.Summerfield Venture L.L.C. IL Summerwood, LLC MD SunStreet Energy Group, LLC DE 13LIST OF SUBSIDARIES AS OF NOVEMBER 30, 2016Company Name State ofIncorporation DBAsTCO QVI, LLC DE Temecula Valley, LLC DE Terra Division, LLC MN The Baywinds Land Trust FL Baywinds Land Trust D/B/A Club VineyardsThe Bridges at Rancho Santa Fe Sales Company, Inc. CA The Bridges Club at Rancho Santa Fe, Inc. CA The LNC Northeast Group, Inc. DE The Oasis Club at LEN-CG South, LLC DE The Preserve at Coconut Creek, LLC FL The Vistas Club at LEN-CG South, LLC FL Treasure Island Holdings, LLC DE Treviso Holding, LLC FL Two Lakes Lennar, LLC DE U.S. Home Corporation DE LennarU.S. Home Corporation DE Lennar CorporationU.S. Home of Arizona Construction Co. AZ U.S. Home Realty, Inc. TX U.S. Insurors, Inc. FL U.S.H. Los Prados, Inc. NV U.S.H. Realty, Inc. VA Universal American Mortgage Company of California CA Eagle Home Mortgage of CaliforniaUniversal American Mortgage Company of California CA Eagle Home MortgageUniversal American Mortgage Company, LLC FL Universal American Mortgage CompanyUniversal American Mortgage Company, LLC FL UAMCUniversal American Mortgage Company, LLC FL Eagle FundingUniversal American Mortgage Company, LLC FL UAMC d/b/a Eagle Home MortgageUniversal American Mortgage Company, LLC FL Eagle Home Mortgage of WashingtonUniversal American Mortgage Company, LLC FL Eagle Funding of WashingtonUniversal American Mortgage Company, LLC FL Eagle Home MortgageUniversal American Mortgage Company, LLC FL Eagle Home Mortgage of OregonUniversal American Mortgage Company, LLC FL Eagle Home Mortgage of UtahUniversal American Mortgage Company, LLC FL Eagle Home Mortgage of WyomingUSH - Flag, LLC FL USH Equity Corporation NV USH Leasing, LLC DE USH LEE, LLC FL USH Woodbridge, Inc. TX UST Lennar Collateral Sub, LLC DE UST Lennar HW Scala SF Joint Venture, a Delaware general partnership DE Valencia at Doral, LLC FL Valencia at Doral ClubVenetian Lennar LLC FL Vineyard Land, LLC DE Vineyard Point 2009, LLC CA Vista Palms Clubhouse, LLC DE Waterview at Hanover, LLC NJ 14LIST OF SUBSIDARIES AS OF NOVEMBER 30, 2016Company Name State ofIncorporation DBAsWCP, LLC SC West Chocolate Bayou Development, LLC TX West Lake Village, LLC NJ West Seattle Project X, LLC DE West Van Buren L.L.C. IL Westchase, Inc. NV Westchase, Ltd. TX White Course Lennar, LLC FL Willowbrook Investors, LLC NJ Winncrest Natomas, LLC NV WIP Lennar OHB, LLC NJ Woodbridge Multifamily Developer I, LLC DE Wright Farm, L.L.C. VA 15Exhibit 23CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in Registration Statement Nos. 333-142732, 333-179290, 333-180887 and 333-210907 on Forms S-8,Registration Statement No. 333-199159 on Form S-3ASR, and Registration Statement No. 333-214566 on Form S-4 of our reports dated January 20, 2017relating to the financial statements and financial statement schedule of Lennar Corporation, and the effectiveness of Lennar Corporation’s internal controlover financial reporting, appearing in this Annual Report on Form 10-K of Lennar Corporation for the year ended November 30, 2016./s/ Deloitte & Touche LLPMiami, FloridaJanuary 20, 2017Exhibit 31.1CHIEF EXECUTIVE OFFICER'S CERTIFICATIONI, Stuart Miller, certify that:1.I have reviewed this annual report on Form 10-K of Lennar Corporation;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by otherswithin those entities, particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting. /S/ STUART MILLER Name: Stuart MillerTitle: Chief Executive OfficerDate: January 20, 2017Exhibit 31.2CHIEF FINANCIAL OFFICER'S CERTIFICATIONI, Bruce Gross, certify that:1.I have reviewed this annual report on Form 10-K of Lennar Corporation;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by otherswithin those entities, particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting. /S/ BRUCE GROSS Name: Bruce Gross Title: Vice President and Chief Financial OfficerDate: January 20, 2017Exhibit 32Officers' Section 1350 CertificationsEach of the undersigned officers of Lennar Corporation, a Delaware corporation (the "Company"), hereby certifies that (i) the Company's Annual Reporton Form 10-K for the year ended November 30, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934and (ii) the information contained in the Company's Annual Report on Form 10-K for the year ended November 30, 2016 fairly presents, in all materialrespects, the financial condition and results of operations of the Company, at and for the periods indicated. /S/ STUART MILLER Name: Stuart Miller Title: Chief Executive Officer /S/ BRUCE GROSS Name: Bruce Gross Title: Vice President and Chief Financial OfficerDate: January 20, 2017

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